Driving Equity: The U.S. Department of Transportation's Disadvantaged Business Enterprise Program, House hearing transcript (September 23, 2020), GovInfo CHRG-116hhrg43413, HTML text
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This is the Government Publishing Office text edition of the House Committee on Transportation and Infrastructure's remote hearing 116-64, “Driving Equity: The U.S. Department of Transportation's Disadvantaged Business Enterprise Program,” on September 23, 2020. Chair Peter A. DeFazio presided. Witnesses came from the Conference of Minority Transportation Officials, the American Council of Engineering Companies, Emerald Consulting Services, the Airport Minority Advisory Council, Broward County, Florida, the Virginia Department of Transportation and NERA Economic Consulting. The committee's background material explains that Congress set a national 10 percent participation goal for firms certified as DBEs, while recipients base their own goals on evidence of available DBEs. Submissions include statements from contractor and industry associations.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
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[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
DRIVING EQUITY: THE U.S. DEPARTMENT OF TRANSPORTATION'S DISADVANTAGED
BUSINESS ENTERPRISE PROGRAM
=======================================================================
(116-64)
REMOTE HEARING
BEFORE THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 23, 2020
__________
Printed for the use of the
Committee on Transportation and Infrastructure
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available online at: https://www.govinfo.gov/committee/house-
transportation?path=/browsecommittee/chamber/house/committee/
transportation
__________
U.S. GOVERNMENT PUBLISHING OFFICE
43-313 PDF WASHINGTON : 2021
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
PETER A. DeFAZIO, Oregon, Chair
SAM GRAVES, Missouri ELEANOR HOLMES NORTON,
DON YOUNG, Alaska District of Columbia
ERIC A. ``RICK'' CRAWFORD, Arkansas EDDIE BERNICE JOHNSON, Texas
BOB GIBBS, Ohio RICK LARSEN, Washington
DANIEL WEBSTER, Florida GRACE F. NAPOLITANO, California
THOMAS MASSIE, Kentucky DANIEL LIPINSKI, Illinois
SCOTT PERRY, Pennsylvania STEVE COHEN, Tennessee
RODNEY DAVIS, Illinois ALBIO SIRES, New Jersey
ROB WOODALL, Georgia JOHN GARAMENDI, California
JOHN KATKO, New York HENRY C. ``HANK'' JOHNSON, Jr.,
BRIAN BABIN, Texas Georgia
GARRET GRAVES, Louisiana ANDRE CARSON, Indiana
DAVID ROUZER, North Carolina DINA TITUS, Nevada
MIKE BOST, Illinois SEAN PATRICK MALONEY, New York
RANDY K. WEBER, Sr., Texas JARED HUFFMAN, California
DOUG LaMALFA, California JULIA BROWNLEY, California
BRUCE WESTERMAN, Arkansas FREDERICA S. WILSON, Florida
LLOYD SMUCKER, Pennsylvania DONALD M. PAYNE, Jr., New Jersey
PAUL MITCHELL, Michigan ALAN S. LOWENTHAL, California
BRIAN J. MAST, Florida MARK DeSAULNIER, California
MIKE GALLAGHER, Wisconsin STACEY E. PLASKETT, Virgin Islands
GARY J. PALMER, Alabama STEPHEN F. LYNCH, Massachusetts
BRIAN K. FITZPATRICK, Pennsylvania SALUD O. CARBAJAL, California,
JENNIFFER GONZALEZ-COLON, Vice Chair
Puerto Rico ANTHONY G. BROWN, Maryland
TROY BALDERSON, Ohio ADRIANO ESPAILLAT, New York
ROSS SPANO, Florida TOM MALINOWSKI, New Jersey
PETE STAUBER, Minnesota GREG STANTON, Arizona
CAROL D. MILLER, West Virginia DEBBIE MUCARSEL-POWELL, Florida
GREG PENCE, Indiana LIZZIE FLETCHER, Texas
MIKE GARCIA, California COLIN Z. ALLRED, Texas
SHARICE DAVIDS, Kansas
ABBY FINKENAUER, Iowa
JESUS G. ``CHUY'' GARCIA, Illinois
ANTONIO DELGADO, New York
CHRIS PAPPAS, New Hampshire
ANGIE CRAIG, Minnesota
HARLEY ROUDA, California
CONOR LAMB, Pennsylvania
CONTENTS
Page
Summary of Subject Matter........................................ v
STATEMENTS OF MEMBERS OF THE COMMITTEE
Hon. Peter A. DeFazio, a Representative in Congress from the
State of Oregon, and Chairman, Committee on Transportation and
Infrastructure:
Opening statement............................................ 1
Prepared statement........................................... 4
Hon. Sam Graves, a Representative in Congress from the State of
Missouri, and Ranking Member, Committee on Transportation and
Infrastructure:
Opening statement............................................ 4
Prepared statement........................................... 5
Hon. Eleanor Holmes Norton, a Delegate in Congress from the
District of Columbia, and Chairwoman, Subcommittee on Highways
and Transit:
Opening statement............................................ 5
Prepared statement........................................... 6
Hon. Rodney Davis, a Representative in Congress from the State of
Illinois, and Ranking Member, Subcommittee on Highways and
Transit:
Opening statement............................................ 7
Prepared statement........................................... 8
Hon. Eddie Bernice Johnson, a Representative in Congress from the
State of Texas, prepared statement............................. 133
Hon. Rick Larsen, a Representative in Congress from the State of
Washington, and Chairman, Subcommittee on Aviation, prepared
statement...................................................... 133
WITNESSES
Evalynn Williams, President and Chief Executive Officer, Dikita
Enterprises, Inc., on behalf of the Conference of Minority
Transportation Officials:
Oral statement............................................... 10
Prepared statement........................................... 11
Geri E. Boyer, P.E., President, Kaskaskia Engineering Group, LLC,
on behalf of the American Council of Engineering Companies:
Oral statement............................................... 14
Prepared statement........................................... 16
Mary T. Lerdahl, President, Emerald Consulting Services, LLC:
Oral statement............................................... 22
Prepared statement........................................... 24
Farad Ali, Chairman, Government Affairs Committee, Airport
Minority Advisory Council:
Oral statement............................................... 27
Prepared statement........................................... 29
Sandy-Michael E. McDonald, Director, Office of Economic and Small
Business Development, Broward County, Florida:
Oral statement............................................... 32
Prepared statement........................................... 33
Sandra D. Norman, Division Administrator, Civil Rights, Virginia
Department of Transportation:
Oral statement............................................... 36
Prepared statement........................................... 37
Jon S. Wainwright, Ph.D., Affiliated Consultant, NERA Economic
Consulting:
Oral statement............................................... 38
Prepared statement........................................... 40
SUBMISSIONS FOR THE RECORD
Submissions for the Record by Hon. Peter A. DeFazio:
Ten Disparity Studies........................................ 3
Letter of June 25, 2020, from Geri E. Boyer, P.E., President,
Kaskaskia Engineering Group, LLC........................... 95
Letter of July 13, 2020, from Lawrence T. Green, President,
Divine Cement, Inc......................................... 134
Letter of July 15, 2020, from Linda Moen, P.E., LEED BD+C,
President and Managing Member, EFK Moen.................... 136
Letter of July 1, 2020, from Carla M. Williams, DBELO,
Director of Community and Business Engagement, Hillsborough
Area Regional Transit Authority, and President, COMTO
Central Florida Chapter.................................... 137
Letter of September 19, 2020, from Colette Holt, Colette Holt
& Associates............................................... 138
Letter of June 16, 2020, from Katherine M. Cloonen,
President, JK Steel Erectors, Inc.......................... 142
Letter of June 24, 2020, from Carol L. Kwan, Carol Kwan
Consulting LLC............................................. 143
Letter of May 26, 2020, from Sarah Imberman, S. Levy Foods... 144
Letter of June 17, 2020, from Constance Macolino, President,
Puget Sound Steel Co., Inc................................. 144
Letter of September 9, 2020, from Robert S. Bright, Founder
and President, Talson Solutions, LLC....................... 145
Letter of September 8, 2020, from Lorenzo Thompson,
Principal, Thompson Civil, LLC............................. 146
Letter of July 1, 2020, from Katey Doman, President, TyE Bar
LLC........................................................ 147
Statement of Joann Payne, President, Women First National
Legislative Committee...................................... 147
Submissions for the Record by Hon. Sam Graves of Missouri:
Statement of the American Road & Transportation Builders
Association................................................ 151
Letter of October 7, 2020, from James V. Christianson, Vice
President, Government Relations, Associated General
Contractors of America..................................... 155
Statement of the Airport Restaurant and Retail Association,
Submitted for the Record by Hon. Rick Larsen................... 159
APPENDIX
Question from Hon. Troy Balderson to Sandy-Michael E. McDonald,
Director, Office of Economic and Small Business Development,
Broward County, Florida........................................ 163
Questions from Hon. Peter A. DeFazio to Jon S. Wainwright, Ph.D.,
Affiliated Consultant, NERA Economic Consulting................ 164
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
September 18, 2020
SUMMARY OF SUBJECT MATTER
TO: LMembers, Committee on Transportation and
Infrastructure
FROM: LStaff, Committee on Transportation and
Infrastructure
SUBJECT: LHearing on ``Driving Equity: The U.S. Department
of Transportation's Disadvantaged Business Enterprise Program''
_______________________________________________________________________
PURPOSE OF HEARING
The Committee on Transportation and Infrastructure will
meet on Wednesday, September 23, 2020, at 10:00 am, in room
2167 Rayburn House Office Building and remotely via Cisco
WebEx, to receive testimony regarding ``Driving Equity: The
U.S. Department of Transportation's Disadvantaged Business
Enterprise Program.'' The Committee will hear from
representatives of the Virginia Department of Transportation;
Broward County, Florida, Office of Small Business and Economic
Development; the Airport Minority Advisory Council (AMAC); the
Conference of Minority Transportation Officials (COMTO);
Emerald Consulting Services; NERA Economic Consulting; and the
American Council of Engineering Companies (ACEC).
BACKGROUND
The U.S. Department of Transportation's (DOT) Disadvantaged
Business Enterprise (DBE) Program was established to remedy
discrimination against minority and women-owned businesses.\1\
The DBE program seeks to ensure those businesses are provided
equal opportunities to compete for contracts assisted by
certain DOT funds administered by the Federal Highway
Administration (FHWA), the Federal Aviation Administration
(FAA), the Federal Transit Administration (FTA), and the
National Highway Traffic Safety Administration (NHTSA).\2\
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\1\ DOT Office of Civil Rights. Disadvantaged Business Enterprise
(DBE) Program. US Department of Transportation. Retrieved September 18,
2020, from https://www.transportation.gov/civil-rights/disadvantaged-
business-enterprise
\2\ 49 CFR 26.3.
---------------------------------------------------------------------------
First established by Federal regulation in 1980 as a
minority and women's business enterprise program, the DBE
program was later statutorily authorized for surface
transportation programs in 1983 by the Surface Transportation
Assistance Act of 1982 (P.L. 97-424) to aid small businesses
owned and controlled by minorities facing historic and
continuing discriminatory barriers to participation in the
highways and transit programs.\3\
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\3\ DOT Office of Civil Rights. Disadvantaged Business Enterprise
(DBE) Program.
---------------------------------------------------------------------------
DBE programs for women-owned businesses and the FAA's
airport DBE program were primarily implemented by regulation
until Congress passed the Surface Transportation and Uniform
Relocation Assistance Act of 1987 (P.L. 100-17) and the Airport
and Airway Safety and Capacity Expansion Act of 1987 (P.L. 100-
223), which expanded statutory authorization for surface and
airport transportation construction DBE programs to include
women-controlled small businesses and codified the airport DBE
program, respectively. The Airport and Airway Safety and
Capacity Expansion Act also established a separate Airport
Concession Disadvantaged Business Enterprise (ACDBE) Program
administered by the FAA for airport concessions and related
contracts.\4\ Since P.L. 100-223 codified the airport
construction DBE program and the ACBDE program, these programs
do not require statutory reauthorization in the same manner as
surface transportation DBE programs.
---------------------------------------------------------------------------
\4\ Id.
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Though not codified like the airport programs, Congress has
regularly reauthorized the DBE program for highways and transit
in successive surface transportation bills, most recently with
the enactment of the Fixing America's Surface Transportation
(FAST) Act (P.L. 114-94). In addition, the U.S. House of
Representatives passed H.R. 2, the Moving Forward Act, which
aims to reauthorize the surface DBE program with some
amendments.
Both the surface DBE program and the aviation construction
DBE program are implemented pursuant to regulations established
under 49 CFR part 26. The ACDBE program is implemented pursuant
to regulations established under 49 CFR part 23.
I. WHAT IS A DBE?
For eligibility purposes, a DBE is defined as a small, for-
profit business where socially and economically disadvantaged
individuals (1) own at least 51 percent of the economic
interests of the entity, and (2) control and manage the
business operations of the firm.\5\ A firm and its minority
and/or women owners seeking certification as a DBE must meet:
(1) an ownership and control test, (2) a personal net worth
test, and (3) a size standard test, requirements for which are
described in regulation.\6\
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\5\ 49 CFR 26.5.
\6\ 49 CFR 26; 49 CFR 23.
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To be regarded as socially disadvantaged means to face
historic and ongoing discrimination, such as racial or ethnic
prejudice or cultural bias due to membership in a particular
group.\7\ Consistent with DOT implementing regulations,
minorities and women are presumed to be socially disadvantaged
(although that presumption is rebuttable).\8\ Others may
qualify as socially disadvantaged on a case-by-case basis.\9\
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\7\ 13 CFR 124.103.
\8\ 49 CFR 26.67(a) and (b).
\9\ 49 CFR 26.67(d).
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To be regarded as economically disadvantaged, an individual
must, among other things, have a personal net worth that does
not exceed $1.32 million, excluding the equity in the
individual's primary residence and the value of their ownership
interest in the firm seeking certification.\10\
To meet size standards for DBE eligibility and be regarded
as a small business in the surface transportation sector, a
business must meet the qualifications of a small business
defined by the Small Business Administration (SBA) in
accordance with the North American Industry Classification
System (NAICS) codes relevant to the business and as defined by
the annual gross receipts or employee number caps outlined for
each industry code.\11\ In addition, the small business must
not have average annual gross receipts over the firm's previous
three fiscal years in excess of $23.98 million, regardless of
the relevant NAICS code qualification.\12\
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\10\ 49 CFR 26.67(a).
\11\ 49 CFR 26.65(a).
\12\ 49 CFR 26.65(b).
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Until the FAA Reauthorization Act of 2018 (P.L. 115-254),
size standards for DBE eligibility in the aviation construction
sector reflected the same requirements as the surface DBE
program. With that Act, however, Congress removed the separate
$23.98 million gross receipts cap requirement for businesses in
the aviation construction sector, tying eligibility
requirements directly to the SBA's definitions of small
businesses.\13\
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\13\ 49 USC Sec. 47113(a)(1).
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In addition, H.R. 2, the Moving Forward Act, proposes to
remove the $23.98 million gross receipts cap from the surface
transportation DBE program as well, so the SBA would determine
business size standards for DBEs. This proposed change would
result in a uniform standard for determining small business
size for both the surface and aviation construction DBE
programs, set by the SBA.
To be certified under the FAA's ACDBE program, a business
must meet different size standards reflective of the diversity
of industries present in airport concessions.\14\
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\14\ 49 CFR 23.33.
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II. HOW ARE FIRMS CERTIFIED?
Recipients of DOT financial assistance (such as state
departments of transportation, local governments, transit
agencies, and port authorities) are required to establish a
Unified Certification Program (UCP) in their state.\15\ The
purpose of a UCP is to ensure DBEs and applicants (including
airport concessionaires) will have ``one-stop shopping'' on all
certification matters with respect to these recipients. If a
business wants to be certified as a DBE, it must submit an
application to the state UCP for approval.\16\ Determinations
as to whether a firm meets the DBE criteria are made by the UCP
using various means, including on-site visits, personal
interviews, reviews of licenses, stock ownership, equipment,
bonding capacity, work completed, resume of principal owners,
financial capacity, and type of work preferred.\17\ Once a DBE
is certified through the UCP, that certification must be
honored by all recipients of DOT funds within the state.\18\
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\15\ 49 CFR 26.81.
\16\ Id.
\17\ 49 CFR 26.83(c).
\18\ 49 CFR 26.81(b).
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While some state UCPs maintain certification reciprocity
agreements with other state UCPs, each state exercises its own
discretion as to whether it will accept certification from
other states.\19\ DBEs wishing to do business in multiple
states must generally recertify with all applicable UCPs.\20\
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\19\ 49 CFR 26.81(e) and (f).
\20\ 49 CFR 26.85.
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III. HOW DOES THE DBE PROGRAM WORK?
Under the authorizing statues for the various DBE programs,
Congress set a national 10 percent participation goal for firms
certified as DBEs in surface transportation programs, in
airport federally assisted contracting (i.e., procurement,
construction, or professional services contracts), and in
airport concessions.\21\
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\21\ See P.L. 114-94 Sec. 1101(b)(3) for surface, and 49 USC
Sec. 47113(b) for aviation.
---------------------------------------------------------------------------
DOT regulations require recipients of federal financial
assistance that anticipate awarding prime contracts of more
than $250,000 to establish an annual aspirational DBE
participation goal that reflects what DBE participation in
federally-assisted projects would look like in the absence of
discrimination.\22\ Recipients must base their goals on how to
achieve a level playing field in their individual programs,
regardless of the 10 percent national goal.\23\ These goals
must be based on demonstrable evidence of the availability of
ready, willing, and able DBEs relative to the DOT-assisted
contracts that will be available that fiscal year (FY).\24\
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\22\ 49 CFR 26.21(a)(1) requires all FHWA ``primary recipients'' of
Federal financial assistance to establish a DBE program, regardless of
contract size. Subrecipients are governed by the prime recipient's DBE
program.
\23\ 49 CFR 26.45(b).
\24\ 49 CFR 26.45.
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The two-step process for goal-setting in accordance with
this demonstrable evidence is laid out in 49 CFR 26.45.
Demonstrable evidence may come from several sources, including,
but not limited to: census data, established DBE directories,
past bidder lists, determinations by other DOT recipients with
substantially similar market areas, and statistical DBE
availability and disparity studies covering recipients' market
areas.\25\ The recipient of DOT funds must establish its goal
for a three-year period and submit that goal with the
determining methodology to the FAA, FHWA, or FTA for review and
approval.\26\
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\25\ 49 CFR 26.45.
\26\ Id.
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It is important to note that a recipient's goal is
aspirational only; quotas and set-asides are generally not
permitted. In addition, DOT does not assess penalties for not
meeting DBE goals as long as good faith efforts are
demonstrably made.\27\ Furthermore, recipients are required to
use race-neutral means to meet as much of their overall goal as
possible (in this context, ``race-neutral'' refers to both race
and gender, i.e., without application of any criteria favoring
DBEs over non-DBEs).\28\ Examples of ``race-neutral means''
include: providing assistance to small businesses in overcoming
issues such as the inability to obtain bonding or financing;
unbundling large contracts to make them more accessible to
small businesses; informational and communication programs on
contracting procedures and specific contract opportunities; and
other business support services.\29\
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\27\ 49 CFR 26.47.
\28\ See 49 CFR 26.5 and 49 CFR 26.51.
\29\ 49 CFR 26.51(b).
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If a recipient is unable to meet its overall DBE
participation goal through race-neutral means, then a recipient
must establish contract goals (which are deemed race-conscious)
for DBE participation.\30\ This means the recipient has
determined that, without the use of race-conscious measures, a
level playing field for DBE businesses could not be achieved.
Contract goals require that prime contractors employed by DOT
recipients make good-faith efforts to award a certain
percentage of their total contract work to certified DBEs in
order to meet the race-conscious portion of their overall DBE
participation goal.\31\ There are no Federally-mandated
penalties for failing to meet these goals as long as good-faith
efforts are made.
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\30\ 49 CFR 26.51(d).
\31\ 49 CFR 26.51(e)(2).
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Importantly, as discussed further in section VI below,
states under the jurisdiction of the Ninth Circuit Court of
Appeals must use evidence from statistical disparity studies
during their goal-setting process before DOT recipients in
those states are allowed to set race-conscious goals for DBE
participation.\32\
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\32\ Case No. C00-5204 RBL (W.D. Wash. June 23, 2006)
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V. WHAT MUST RECIPIENTS REPORT TO DOT MODAL ADMINISTRATIONS?
Recipients of DOT funds must maintain accurate records of
data related to the participation of DBEs on projects and
report these records regularly to DOT modal
administrations.\33\ FHWA and FTA recipients must submit a
uniform report of DBE contract awards, commitments, and
payments twice per FY, and FAA recipients must submit such a
report once per FY.\34\
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\33\ 49 CFR 26.11.
\34\ Id.
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These uniform reports break down awards, commitments, and
payments of federal financial assistance in terms of, among
other things: (1) number of contracts awarded to DBEs as a
percentage of total contracts, (2) dollar amount of contracts
awarded to DBEs as a percentage of total contract dollars, (3)
a breakdown of number of contracts awarded to DBEs
disaggregated by race, gender, or other applicable categories,
and (4) a breakdown of contract dollar amounts awarded to DBEs
disaggregated by race, gender, or other applicable
categories.\35\
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\35\ 49 CFR 26, Appendix B.
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VI. HOW HAS THE DBE PROGRAM BEEN REVIEWED BY THE COURTS?
Numerous court cases dealing with the DOT's DBE program or
questions of race or gender-based discrimination have affected
the implementation of the program over time. Some have involved
the program directly and others indirectly. Below is a brief
overview of a few of the most relevant cases.
A. CITY OF RICHMOND V. J.A. CROSON CO., 488 U.S. 469 (1989)
In 1989, the United States Supreme Court held in City of
Richmond v. J.A. Croson Co. (Croson) that a Richmond, Virginia,
set-aside program giving preference to minority businesses in
the awarding of municipal contracts was unconstitutional on the
grounds that the city had failed to adequately demonstrate its
compelling interest in establishing such a program on the basis
of relevant, measurable evidence.\36\ With this holding, the
Court established an outline of what would constitute a
permissible program for race-based awarding of public contracts
by requiring that such programs be subject to a ``strict
scrutiny'' standard (the most stringent standard) of judicial
review.\37\ Under the strict scrutiny standard, a public entity
must prove: (1) that it has a ``compelling interest'' in
remedying discrimination based on ``a strong basis in
evidence,'' and (2) that the measures employed to remedy such
discrimination are ``narrowly tailored'' to the scope of the
evidence presented.\38\
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\36\ 488 U.S. 469 (1989).
\37\ Id.
\38\ Id.
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B. ADARAND V. PENA, 515 U.S. 200 (1995)
In 1995, in Adarand v. Pena (Adarand), a case dealing with
DOT funds expended in the state of Colorado, the United States
Supreme Court held that the strict scrutiny standard previously
applied in Croson applies to the Federal government in the
establishment of race-based programs.\39\ While the Court did
not specifically determine the constitutionality of DOT's DBE
program in Adarand, the Administration undertook a review of
Federal programs, including the DBE program, that used race or
gender as a basis for decision-making to ensure compliance with
the strict scrutiny standard.\40\ In 1998, Congress
reauthorized the surface DBE programs with the Transportation
Equity Act for the 21st Century (TEA-21, P.L. 105-178). In
1999, the DOT finalized new rules for both the surface and
aviation DBE programs to ensure compliance with Adarand, and
new rules for the ACDBE program were issued in 2005.\41\ Since
the new rules were adopted, courts considering the
constitutionality of the DBE program have consistently upheld
the program against facial challenges.\42\
---------------------------------------------------------------------------
\39\ 515 U.S. 200 (1995).
\40\ See Affirmative Action Review Report to the President.
Retrieved September 18, 2020, from https://
clintonwhitehouse2.archives.gov/WH/EOP/OP/html/aa/aa-index.html
\41\ See 54 Fed. Reg. 5,096 (February 2, 1999), and 70 Fed. Reg.
14,496 (March 22, 2005)
\42\ See Adarand Constructors, Inc. v. Slater, 228 F.3d 1147 (10th
Cir. 2000), cert. granted, 532 U.S. 941, then dismissed as
improvidently granted, 534 U.S. 103 (2001) (Adarand VII); Sherbrooke
Turf, Inc. v. Minnesota Department of Transportation, and Gross Seed
Co. v. Nebraska Department of Roads, 345 F.3d. 964 (8th Cir. 2003),
cert. denied, 541 U.S. 1041 (2004); Western States Paving Co., Inc. v.
Washington Department of Transportation, 407 F.3d 983 (9th Cir. 2005),
cert. denied, 546 U.S. 1170 (2006); Northern Contracting, Inc. v.
Illinois Department of Transportation, 473 F.3d 715 (7th Cir. 2007)
(Northern Contracting III); Orion Insurance Group v. Washington OMWBE,
U.S. DOT, 2018 WL 6695345 (9th Cir. 2018), cert. denied, June 24, 2019.
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C. WESTERN STATES PAVING CO, INC. V. WASHINGTON STATE DEPARTMENT OF
TRANSPORTATION, CASE NO. C00-5204 RBL (W.D. WASH.
JUNE 23, 2006)
In 2005, the U.S. Court of Appeals for the Ninth Circuit
decided in Western States Paving Co, Inc. v. Washington State
Department of Transportation (Western States) that DOT's DBE
program was facially constitutional, however was
unconstitutional ``as applied'' by Washington State's DOT
(WashDOT), because WashDOT had failed to meet the strict
scrutiny requirement that the program be narrowly tailored.\43\
The court held WashDOT had not established with sufficient
statistical evidence that it needed race-conscious measures to
meet WashDOT's DBE participation goals.\44\ In response to this
ruling, the DOT advised all states within the jurisdiction of
the Ninth Circuit Court to implement only race-neutral program
goals until statistical disparity studies could be completed to
meet strict scrutiny standards for race-conscious contracting
goals.\45\
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\43\ Case No. C00-5204 RBL (W.D. Wash. June 23, 2006).
\44\ Id.
\45\ DOT Office of Civil Rights. Western States Paving Company Case
Q&A. US Department of Transportation. Retrieved September 18, 2020 from
https://www.transportation.gov/osdbu/disadvantaged-business-enterprise/
western-states-paving-company-case-q-and-a
---------------------------------------------------------------------------
VII. WHAT ARE DISPARITY STUDIES AND HOW DO THEY IDENTIFY DISCRIMINATION
IN MARKETS?
Disparity studies are complex statistical analyses of
relevant marketplaces for Federal contracts. Study methodology
can vary, but studies generally aim to present policymakers
with a ``disparity ratio,'' the relative percentage of Federal
contract dollars awarded to minority groups and women in
comparison with the percentage such groups would be expected to
receive in a marketplace where discrimination is not
present.\46\ Disparity studies conducted for DOT funding
recipients may include, among other factors, analysis such as:
(1) an empirical determination of the appropriate market area
and appropriate product markets relevant to the recipients
contracting activity; (2) an estimate of the fraction of DBEs
compared with non-DBEs in the relevant market area and product
markets (DBE availability); (3) an estimate of the percentage
of the recipient's contract dollars earned by DBEs (DBE
utilization); (4) a statistical comparison of DBE availability
and utilization; (5) econometric analysis of the relative
success of DBEs in the recipients public sector market as well
as the corresponding private sector market; and (6) econometric
analysis of DBE access to capital in the relevant marketplace.
---------------------------------------------------------------------------
\46\ National Academies of Sciences, Engineering, and Medicine,
Transportation Research Board, & National Cooperative Highway Research
Program. (2010). Guidelines for Conducting a Disparity and Availability
Study for the Federal DBE Program. The National Academies Press.
Retrieved September 18, 2020, from https://www.nap.edu/catalog/14346/
guidelines-for-conducting-a-disparity-and-availability-study-for-the-
federal-dbe-program
---------------------------------------------------------------------------
As noted, recipients of DOT funds may use, and recipients
under the jurisdiction of the Ninth Circuit Court generally
must use pursuant to Western States, statistical disparity
studies to aid in the establishment of goals for DBE
participation on Federal-aid contracts. Since the Croson
decision, many public agencies across the country, including
DOT funding recipients, have relied upon disparity studies to
establish accurate, empirically-based goals for minority
participation in public contracting programs, including the
DOT's DBE program.
WITNESSES
LMr. Farad Ali, Airport Minority Advisory Council
LMs. Geri E. Boyer, P.E., American Council of
Engineering Companies
LMs. Mary Lerdahl, Emerald Consulting Services
LMr. Sandy-Michael McDonald, Broward County,
Florida, Office of Economic and Small Business Development
LMs. Sandra Norman, Virginia Department of
Transportation
LMr. Jon Wainwright, Ph.D., NERA Economic
Consulting
LMs. Evalynn Williams, Conference of Minority
Transportation Officials
DRIVING EQUITY: THE U.S. DEPARTMENT OF TRANSPORTATION'S DISADVANTAGED
BUSINESS ENTERPRISE PROGRAM
----------
WEDNESDAY, SEPTEMBER 23, 2020
House of Representatives,
Committee on Transportation and Infrastructure,
Washington, DC.
The committee met, pursuant to call, at 10:01 a.m., in room
2167 Rayburn House Office Building and via Cisco Webex, Hon.
Peter A. DeFazio (Chairman of the committee) presiding.
Mr. DeFazio. The committee will come to order.
I ask unanimous consent that the chair be authorized to
declare recess at any time during today's hearing.
Without objection, so ordered.
Before proceeding further, I would first like to make a few
comments about how we intend to proceed today. We had
previously covered these issues, but I want to briefly remind
Members for this hearing; it has been a while.
Today's hearing is being held in the committee's hearing
room, as well as remotely by Cisco Webex. For Members and staff
in the hearing room, I do have an announcement based on
guidance from the Attending Physician, dated June 16, 2020.
Members, staff, and all those physically present are informed
that, in accordance with recent guidance from the Office of the
Attending Physician, masks must be worn at all times during
today's proceeding, except when a Member is speaking at a
microphone.
The chair views this as a safety issue and, therefore, an
important matter of order and decorum, and will assert his
responsibility to preserve order and decorum with respect to
the wearing of masks. The chair's authority to enforce the
preservation of order and decorum during committee proceedings
derives from the Speaker's enforcement authority under clause 2
of rule I. Pursuant to clause 1 of rule XI, the rules of the
House are the rules of its committees and subcommittees, as far
as applicable.
The committee chair has long been responsible for the
enforcement of general decorum in their respective committees.
The chair would greatly prefer that all present simply uphold
the decorum of the committee by complying with reasonable
safety standards that are recommended by the Attending
Physician and are respectful of all the occupants in the room.
However, failing that, enforcement would include denial of
recognition toward Members who refuse to uphold standards of
decorum.
As this is a hybrid hearing, I also want to remind Members
of key regulations from the House Committee on Rules to ensure
the hearing goes smoothly. Members must be visible--hello--on
screen for purposes of identification when joining this
hearing. Members must also continue to use the video function
software platform, Cisco Webex, as lame as it is, for the
remainder of the time they are attending this hearing, unless
experiencing connectivity issues or other technical problems.
If a Member is experiencing any connectivity issues or
other technical problems, please inform committee staff as soon
as possible so you can receive assistance. The chat function is
available for Members on the Webex site platform for this
purpose. Members can also call the committee's main phone line,
202-225-4472, for technical assistance by phone.
Members may not participate remotely in any other
proceeding that may be occurring simultaneously.
It is the responsibility of each Member seeking recognition
to unmute their microphone prior to speaking. To avoid any
inadvertent background noise, I request every Member to keep
their microphone muted when not seeking recognition to speak.
Should I hear any inadvertent background noise, I will request
the Member to please mute their microphone.
Finally, despite this being a hybrid hearing, I want to
emphasize that all the standard rules of decorum apply.
As the chair of today's hearing, I will make a good faith
effort to provide every Member experiencing connectivity issues
an opportunity to participate fully.
Members will have the standard 5 minutes to ask questions.
To insert a document into the record, please have your
staff email it to the committee's clerk, Mike Twinchek.
This hearing is also being livestreamed for the public to
view.
And I would now recognize myself for my opening statement.
Today's hearing is focused on the United States Department
of Transportation's Disadvantaged Business Enterprise program,
DBE program, for short. It is an essential program that seeks
to remedy discrimination and its effects on women- and
minority-owned businesses as they compete for federally
assisted transportation contracts. It seeks to ensure all
businesses can compete for Federal transportation dollars on a
level playing field.
I am proud to follow in the footsteps of my friend, the
former chairman of this committee, Jim Oberstar--there is Jim,
right there [indicating portrait]--who was the last chairman to
convene a hearing on this subject, 11 years ago, in 2009.
I am also disturbed that, in the 11 years since that
hearing, discrimination has continued to plague women and
minorities in this country in the transportation sector.
Discrimination is still terribly real in America. And if the
events of 2020 have not proven that convincingly enough, I am
confident the overwhelming evidence we have examined for this
hearing will at least shut the door on the question, as it
relates to federally assisted transportation projects.
Our committee planned to hold this hearing more than 5
months ago, but our plans were delayed by the rapid spread of
the COVID-19 pandemic. Sadly, the continuing pandemic only
underscores the need for this hearing and for the DBE program.
It is increasingly clear minority communities and minority-
owned businesses have been disproportionately devastated by the
virus.
Almost 2 months ago, during debate before the passage of
H.R. 2 on the House floor, I submitted 30 high-quality
disparity studies into the Congressional Record, including many
hundreds of pages of rigorous empirical evidence testifying to
the reality of discrimination and its effects on the
transportation sector.
Today I ask unanimous consent to insert into this
committee's record an additional 10 studies, for a total of 40
studies, only a sampling of the mountain of evidence this
committee has seen over the years testifying to the reality of
discrimination in the transportation sector.
Without objection, so ordered.
[The information follows:]
Ten Disparity Studies, Submitted for the Record by Hon. Peter A.
DeFazio
The full text of each report is held on file electronically with
the Committee on Transportation and Infrastructure.
Dallas Fort Worth International Airport Disparity Study 2019, Colette
Holt & Associates, 2019
Washington State Airports Disparity Study 2019, Conducted for the
Washington State Department of Transportation, Colette Holt &
Associates, 2019
City of South Bend Disparity Study 2019, Colette Holt & Associates,
2019
2017 Minnesota Joint Disparity Study, Metropolitan Airports Commission,
Draft Report, Keen Independent Research, January 2018
2015 Disadvantaged Business Enterprise Disparity Study, John Wayne
Airport, County of Orange, California, MGT of America, Inc., December
2016
2015 Procurement Disparity Study, City of Portsmouth, Virginia, MGT of
America, Inc., 2015
Tampa International Airport 2015 Disparity Study Update, MGT of
America, Inc., August 2015
The State of Minority- and Women-Owned Business Enterprise: Evidence
from Memphis, Prepared for the Memphis-Shelby County Airport Authority,
NERA Economic Consulting, December 2013
The State of Minority- and Women-Owned Business Enterprise: Evidence
from Mississippi, Prepared for the Jackson Municipal Airport Authority,
NERA Economic Consulting, December 2012
The State of Minority- and Women-Owned Business Enterprise: Evidence
from Missouri, Prepared for the Missouri Department of Transportation,
NERA Economic Consulting, August 2012
Mr. DeFazio. I repeatedly pointed to these disparity
studies to demonstrate the reality of discrimination and its
effects. But it is equally important to note that our committee
has received qualitative evidence of discrimination, as well.
Letters from DBE-certified business owners and other
stakeholders from across the country have come to this
committee in the last few months, testifying to the importance
of the program and to the reality of discrimination faced by
women and minority business owners. Some of those business
owners and stakeholders are before us, virtually, today to
share their stories, and I thank them for their testimony.
The DBE program has been narrowly constructed to combat the
discrimination laid out in the evidence from across this
country. It is not a perfect program; I am sure we will hear
more about that today. But I believe it is an essential
program, if we want to ensure a level playing field for all
American businesses wishing to compete for Federal
transportation dollars.
Once again, I want to thank all the witnesses for taking
the time to be with us today, particularly in this rather
awkward virtual format. This is a profoundly important topic,
and I look forward to hearing your testimony.
[Mr. DeFazio's prepared statement follows:]
Prepared Statement of Hon. Peter A. DeFazio, a Representative in
Congress from the State of Oregon, and Chairman, Committee on
Transportation and Infrastructure
Today's hearing is focused on the U.S. Department of
Transportation's Disadvantaged Business Enterprise, or DBE, Program.
This essential program seeks to remedy discrimination and its effects
on women- and minority-owned businesses as they compete for Federally-
assisted transportation contracts. It seeks to ensure all businesses
can compete for Federal transportation dollars on a level playing
field.
I am very proud to follow in the footsteps of my friend, the former
Chairman of this Committee, Jim Oberstar, who was the last Chairman to
convene a hearing on this subject eleven years ago in 2009. But I am
also disturbed that in the eleven years since that hearing
discrimination has continued to plague women and minorities in this
country and in the transportation sector.
Discrimination is still terribly real in America, and if the events
of 2020 have not proven that convincingly enough, I'm confident the
overwhelming evidence we have examined for this hearing will at least
shut the door on the question as it relates to Federally-assisted
transportation contracts.
Our Committee planned to hold this hearing over five months ago,
but our plans were delayed by the rapid spread of the COVID-19
pandemic. Sadly, the continuing pandemic only underscores the need for
this hearing and for the DBE program. It is increasingly clear minority
communities and minority-owned businesses have been disproportionately
devastated by the virus.
Almost two months ago, during debate before the passage of HR 2 on
the House floor, I submitted thirty, high-quality disparity studies
into the Congressional Record including many hundreds of pages of
rigorous empirical evidence testifying to the reality of discrimination
and its effects in the transportation sector. Today, I ask unanimous
consent to insert into this Committee's Record an additional ten
studies, for a total of forty studies--only a sampling of the mountain
of evidence this Committee has seen over the years--testifying to the
reality of discrimination in the transportation sector.
I have repeatedly pointed to these disparity studies to demonstrate
the reality of discrimination and its effects, but it is equally
important to note that our Committee has received qualitative evidence
of discrimination as well. Letters from DBE-certified business owners
and other stakeholders from across the country have come to this
committee in the last few months testifying to the importance of the
program, and to the reality of discrimination faced by women and
minority business owners. Some of those business owners and
stakeholders are before us today to share their stories, and I thank
them for being here.
The DBE program has been narrowly constructed to combat the
discrimination laid out in the evidence from across this country. It is
not a perfect program, and I'm sure we will hear more about that today.
But I believe it is an essential program if we want to ensure a level
playing field for all American businesses wishing to compete for
Federal transportation dollars.
Once again, I want to thank all the witnesses for taking the time
to be with us today, particularly in this virtual format. This is a
profoundly important topic, and I look forward to hearing your
testimony.
Mr. DeFazio. With that, I would recognize the ranking
member, Sam Graves, for an opening statement.
Mr. Graves of Missouri. Thank you, Chairman DeFazio, and I
want to thank you for calling today's hearing to review the
Department of Transportation's Disadvantaged Business
Enterprise, or DBE, program.
We are all here today to examine the DBE program and
determine what, if anything, can be done to improve the
program, moving forward.
It has been 37 years since Congress first created the DBE
program, which was intended to help small businesses owned and
controlled by those facing discriminatory barriers in the
transportation, construction, and airport concessions industry.
Congress has recognized the success of the DBE program by
continuing to keep it in place, and making adjustments as
needed.
I look forward to hearing from today's witnesses as to the
progress that we have made towards realizing the goals of the
DBE program, and what recommendations they have.
And with that, I yield back.
[Mr. Graves of Missouri's prepared statement follows:]
Prepared Statement of Hon. Sam Graves, a Representative in Congress
from the State of Missouri, and Ranking Member, Committee on
Transportation and Infrastructure
We are here today to examine the DBE program and determine what, if
anything, can be done to improve the program going forward.
It has been 37 years since Congress first created the DBE program,
which was intended to help small businesses owned and controlled by
those facing discriminatory barriers in the transportation construction
and airport concession industries.
Congress has recognized the success of the DBE program by
continuing it and making adjustments as needed.
I look forward to hearing from today's witnesses as to the progress
that we have made toward realizing the goals of the DBE program, and
what recommendations they have.
Mr. DeFazio. I thank the gentleman. I now recognize the
chair of the Subcommittee on Highways and Transit,
Congresswoman Norton, for a statement.
Ms. Norton. Thank you, Mr. Chairman. I very much appreciate
your holding this important hearing, especially this year.
We are at a pivotal moment in our Nation's history, we are
shining a long-overdue light on the lived realities of people
of color in this country, despite our pledge of liberty and
justice for all. Over the last few months, the vulnerability of
African Americans, Latinos, Native American, and other Black
and Brown people has been unmistakably demonstrated as we ride
wave after wave of crisis, a global pandemic, a tanking
economy, and systemic racism repeatedly manifesting itself.
The way in which our Nation has failed and marginalized
large populations of our citizens, while unbearable to watch
over and over again, comes as no surprise to those of us who
feel the prevalence of racism in our experience.
I have spent my entire career--in Congress, and as chair of
the U.S. Equal Opportunity Commission before that--fighting for
equality and seeking to break down barriers so that all
citizens have the same opportunities to participate and thrive
in our economy and our society.
One of the most powerful tools in the field of
transportation and construction to assist people who have been
routinely left out is the Disadvantaged Business Enterprise
program. This program, when properly administered and enforced,
ensures that businesses owned by women and minorities have a
fair chance to compete for federally assisted transportation
contracts. The need for this program is ongoing, and stronger
than ever, as income inequality in this country, with a
pandemic helping it to grow, continues.
Today's panel will provide mountains of statistical
evidence that show discrimination in transportation and
construction projects. Mr. Wainwright's testimony documents,
through rigorous statistical analysis and survey data collected
by various agencies, the continued need for the DBE program. We
are also joined today by individual business owners who have
participated in the DBE program to provide some context for why
these surveys and statistical studies matter.
But let me point to a 2018 study conducted for the Maryland
Department of Transportation, whose geographic market includes
Washington, DC. The study looked at, among other things,
whether prime contractors who work with minority- and women-
owned firms as subcontractors on contracts with DBE-type goals
ever solicit or hire those same firms to work on contracts
without such goals.
The answers were stark and stunning: 69 percent of African-
American-owned firms responded that they were seldom or never
solicited to work on contracts without goals in place, and 74
percent of African-American-owned firms were seldom or never
hired to work on contracts without goals. For Hispanic
Americans, the results were 47 percent and 52 percent. For
Asian Americans, the results were 56 percent and 61 percent.
For Native Americans, the results were 82 percent and 70
percent. And for nonminority women, the results were 54 percent
and 53 percent. This is just one regional example, but this
pattern repeats itself across the country.
In closing, I remind my colleagues that this hearing
presents a welcome opportunity to elevate the realities of
minority- and women-owned business owners. By holding this
hearing today, we ensure that the DBE program and the business
owners it lifts up will receive thorough consideration by our
committee.
We also have the opportunity to learn what policy changes
Congress should consider for the continued success of the DBE
program.
And I look forward to hearing from today's witnesses, as
well as from my fellow members of this committee.
Thank you very much, Mr. Chairman.
[Ms. Norton's prepared statement follows:]
Prepared Statement of Hon. Eleanor Holmes Norton, a Delegate in
Congress from the District of Columbia, and Chairwoman, Subcommittee on
Highways and Transit
Thank you, Mr. Chairman. I cannot overstate the importance of this
hearing on the U.S. Department of Transportation's Disadvantaged
Business Enterprise program. I thank Chairman DeFazio, Ranking Member
Graves, and all the Members participating today for your time and
attention to this critical topic.
We are at a pivotal moment in our Nation's history. We are shining
a long overdue light on the lived realities for people of color in this
country, despite our pledge of ``liberty and justice for all''. Over
the last few months, the vulnerability of African American, Latinx,
Native American, and other black and brown people has been unmistakably
demonstrated as we ride wave after wave of crisis--a global pandemic, a
tanking economy, and systemic racism repeatedly manifesting as physical
violence.
The ways in which our Nation has failed and marginalized large
populations of our citizens--while unbearable to watch over and over
again--comes as no surprise to those of us who can feel the prevalence
of racism in our bones. I have spent my entire career--in Congress, and
as Chair of the U.S. Equal Opportunity Commission before that--fighting
for equality and seeking to break down barriers so that truly all
citizens have the same opportunities to participate and thrive in our
economy and our society.
One of the most powerful tools in the field of transportation and
construction to assist people who have routinely been left out or left
behind is the U.S. Department of Transportation's Disadvantaged
Business Enterprise (DBE) Program. This program, when properly
administered and enforced, ensures that businesses owned by women and
minorities have a fair chance to compete for federally assisted
transportation contracts.
The need for this program is ongoing, and stronger than ever, as
income inequality in this country with the pandemic helping it to grow.
Today's panel will provide mountains of statistical evidence that shows
discrimination on transportation construction projects is,
unfortunately, alive and well.
Mr. Wainwright's testimony documents, through rigorous statistical
analysis and survey data collected by various public agencies, the
continued need for the DBE program.
We are also joined today by individual business owners who have
participated in the DBE program and will share their personal stories
of how this program affirmatively created opportunities that did not
exist in its absence. I would like in particular to thank Ms. Lerdahl,
Ms. Williams, and Ms. Boyer for sharing your experiences with the
Committee.
To provide some context for why these surveys and statistical
studies matter, let me point to a 2018 study conducted for the Maryland
Department of Transportation, whose geographic market area includes
Washington, D.C. The study looked at, among other things, whether prime
contractors who work with minority- and women-owned firms as
subcontractors on contracts with DBE-type goals ever solicit or hire
those same firms to work on contracts without such goals. The answers
were stark and stunning--69 percent of African American owned firms
responded that they were seldom or never solicited to work on contracts
without goals in place, and 74 percent of African American owned firms
were seldom or never hired to work on contracts without goals. For
Hispanic Americans the results were 47 percent and 52 percent; for
Asian Americans the results were 56 percent and 61 percent; for Native
Americans the results were 82 percent and 70 percent; and for non-
minority women, the results were 54 percent and 53 percent. This is
just one regional example but this pattern repeats itself across the
country.
In closing, I remind my colleagues that this hearing presents a
welcome opportunity to elevate the realities of minority and women-
owned business owners. By holding this hearing today, we ensure that
the DBE program and the business owners it lifts up receive thorough
consideration by this Committee. We also have the opportunity to learn
what policy changes Congress should consider for the continued success
of the DBE program in the future.
I look forward to hearing from today's witnesses, as well as my
fellow Members, on the DBE program.
Mr. DeFazio. Thank you, Ms. Norton. I now call on the
ranking member of the Subcommittee on Highways and Transit, Mr.
Davis.
Mr. Davis. Thank you, Chairman DeFazio. I want to thank the
witnesses for participating in this important hearing. I want
to give a special welcome to my friend, Ms. Geri Boyer, who is
in southern Illinois right now.
I understand Congressman Bost is going to be providing us
with your full introduction today, so I won't steal his
thunder, unless he screws it up.
So I am watching you right now, Mike.
But it is great to see you. I appreciate the work you do
for Illinois and across the Midwest.
The Disadvantaged Business Enterprise program, administered
by the Department of Transportation, applies to airport
construction, airport concessions, and surface transportation
construction programs. The program addresses discrimination
against minority- and women-owned businesses, and provides
those businesses within the transportation industry an equal
opportunity to participate in billions of dollars of DOT-
assisted highway, transit, and airport contracts each year.
The DBE program has been successful, and this committee has
demonstrated a bipartisan commitment to this program and to
promoting full and fair access to transportation contracting
opportunities.
I commend the chairman and the ranking member for holding
this hearing today. This is an important discussion, important
to all of us in the room, and those connecting remotely, and to
the Nation, as a whole.
Mr. Chair, I yield back the balance of my time.
[Mr. Davis' prepared statement follows:]
Prepared Statement of Hon. Rodney Davis, a Representative in Congress
from the State of Illinois, and Ranking Member, Subcommittee on
Highways and Transit
I want to thank the witnesses for participating in this important
hearing, and I want to give a special welcome to Ms. Geri Boyer. It is
great to see you and I appreciate the work you do for Illinois and
across the Midwest.
The Disadvantaged Business Enterprise program, administered by the
Department of Transportation, applies to airport construction, airport
concessions, and surface transportation construction programs. The
program addresses discrimination against minority and women-owned
businesses and provides those businesses within the transportation
industry an equal opportunity to participate in billions of dollars of
DOT-assisted highway, transit, and airport contracts each year.
The DBE program has been successful, and this Committee has
demonstrated a bipartisan commitment to this program and to promoting
fair and full access to transportation contracting opportunities.
I commend you for holding this hearing today. This is an important
discussion--important to all of us in the room and those connecting
remotely, and to the Nation as a whole.
Mr. DeFazio. I thank the gentleman.
I would now like to welcome the witnesses on our panel: Ms.
Evalynn Williams, president, Dikita Enterprises, on behalf of
the Conference of Minority Transportation Officials; Ms. Geri
Boyer, president, Kaskaskia Engineering Group, on behalf of the
American Council of Engineering Companies; Ms. Mary Lerdahl,
owner, Emerald Consulting Services; Mr. Farad Ali, at-large
board director, Airport Minority Advisory Council; Mr. Sandy-
Michael McDonald, director, Office of Economic and Small
Business Development, Broward County, Florida; and Ms. Sandra
Norman, administrator, civil rights division, Virginia
Department of Transportation; and Mr. Jon Wainwright, Ph.D.,
affiliated consultant, NERA Economic Consulting.
Thank you all for participating today. We are looking
forward to your testimony.
Without objection, our witnesses' full statements will be
included in the record.
Hearing none.
Since your written testimony has been made part of the
record, the committee requests you limit your oral testimony to
5 minutes. Summarize as best as possible.
Before we hear from our panel of witnesses, I recognize
Representative Johnson to introduce Ms. Evalynn Williams.
Representative Johnson?
Ms. Johnson of Texas. Yes, thank you very much. And I want
to thank all of the witnesses for being present.
I want to say that I am pleased to introduce Ms. Evalynn
Williams, who is a constituent in Dallas, Texas. She has served
as the chief financial officer for Dikita for 26 years, prior
to transitioning to the president and CEO in 2010. Following
and guided by her father, the company has grown to
unprecedented heights. Under her leadership, the company has
continued to thrive in new markets and obtain large and notable
projects. Dikita's largest client is Dallas Area Rapid Transit,
where the company has managed transit and NTD data for the last
28 consecutive years. Recently, Dikita completed a prime role
as a 49-percent JV partner designing and managing the
construction of DART's last 3 miles of light rail, and I look
forward to her testimony.
And thank you very much for being here.
Mr. DeFazio. Thanks, Representative Johnson. I now
recognize Representative Bost to introduce Ms. Geri Boyer,
under threat by Rodney Davis.
Mr. Bost. Thank you, Mr. Chairman. You know, I am happy to
have the opportunity to introduce our constituent, Geri Boyer
from Belleville, Illinois, as a witness for today's hearing.
Ms. Boyer is a founder, owner, and president of Kaskaskia
Engineering Group. Kaskaskia Engineering Group is a civil
engineering and contracting firm that has been recognized on
the list of St. Louis Business Journal's largest women-owned
businesses over the past decade. Ms. Boyer has also won
multiple awards for her leadership. She is an active member of
the American Council of Engineering Companies, Associated
General Contractors of Illinois, Illinois Association of County
Engineers, and the Illinois Association of Highway Engineers.
Ms. Boyer is also an active member within our community,
working with the Belleville CEO Program and is the civil
chairperson for the Belle-Scott Committee of the Greater
Belleville Chamber of Commerce.
I am excited to have her give her testimony on the
Department's Disadvantaged Business Enterprise program, and
look forward to the insight that she can offer, given her years
of success in business. She is one of the most qualified
witnesses, I believe, that is on the panel today, and I
appreciate her being here, and I appreciate the opportunity to
introduce her.
And Rodney, I hope that was good enough for you, because I
think Geri is going to do a great job.
And with that, I yield back.
Mr. DeFazio. Rodney stepped out, but I am sure he is in
accordance. I think that was very well done. So thank you.
We will now move to witness testimonies.
Ms. Williams, you may proceed. You are recognized for 5
minutes.
TESTIMONY OF EVALYNN WILLIAMS, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, DIKITA ENTERPRISES, INC., ON BEHALF OF THE CONFERENCE
OF MINORITY TRANSPORTATION OFFICIALS; GERI E. BOYER, P.E.,
PRESIDENT, KASKASKIA ENGINEERING GROUP, LLC, ON BEHALF OF THE
AMERICAN COUNCIL OF ENGINEERING COMPANIES; MARY T. LERDAHL,
PRESIDENT, EMERALD CONSULTING SERVICES, LLC; FARAD ALI,
CHAIRMAN, GOVERNMENT AFFAIRS COMMITTEE, AIRPORT MINORITY
ADVISORY COUNCIL; SANDY-MICHAEL E. McDONALD, DIRECTOR, OFFICE
OF ECONOMIC AND SMALL BUSINESS DEVELOPMENT, BROWARD COUNTY,
FLORIDA; SANDRA D. NORMAN, DIVISION ADMINISTRATOR, CIVIL
RIGHTS, VIRGINIA DEPARTMENT OF TRANSPORTATION; AND JON S.
WAINWRIGHT, Ph.D., AFFILIATED CONSULTANT, NERA ECONOMIC
CONSULTING
Ms. Williams. Good morning, and I want to thank you for
allowing me the opportunity to testify in support of the DBE
program. My name is Eve Williams, president of Dikita
Enterprises, a 40-year-old African-American engineering firm
located in Dallas, Texas. And today I speak on behalf of COMTO,
as well as all the DBEs across the Nation.
I also sit on the APTA board of directors, where next month
I will become the first African-American female to chair its
distinguished Business Members Board of Governors.
My company has been a part of the DBE program since its
beginning, and is the oldest black engineering firm in north
Texas.
Being a female, Black, and a small business in the
construction industry has many challenges. Programs such as the
DBE program provide us a chance to participate in lead roles,
which affords us the opportunity to create majority-minority
teams. One success story I would like to share.
Dikita was a 49-percent partner in a team where we designed
the last 3 miles of the rail system for Dallas Area Rapid
Transit. We saved the agency over $4 million, and began revenue
service 2 months ahead of schedule. The icing on the cake is
that 60 percent of the project was designed by DBE firms.
Being called disadvantaged is not a privilege, nor does it
sound like a company's goal. And quite frankly, it was
embarrassing, explaining that to my 25-year-old millennial.
What an engaging conversation that followed.
The public sector is where firms like Dikita has its
greatest opportunity. But please note, if majority companies
and public agencies are not incentivized to include firms like
mine, they won't. Let me give you a case in point.
We were going after a project in a small suburban community
near Dallas. I knew about the proposal because of my strong
relationships in the community. The project was much in our
wheelhouse, but since there were parts of the work that others
could do better, we reached out to a nationally known, local
firm that we had worked with in the past. They were not aware
of the opportunity. What happened next was shocking, but not
surprising.
In an email thread that was inadvertently sent to me, I
read a discussion that went something like this. Of course, I
changed the names here. So I called John to ask if they'd be
interested in teaming with us. John informed his boss, Ted.
John explained the services, and thought Dikita and their
company could do well, since we had a relationship.
Ted asked about the minority participation goal. John told
him there was no minority goal. Ted asked John, ``Then why
would we sub to Dikita?'' John reminded Ted that Dikita was the
best at what they were doing.
Ted told him that, since there was no minority
participation goal, ``Dig into the opportunity, and we will
just do it ourselves.''
When John questioned Ted again, Ted told them, ``Hey, we're
bigger, just reject the offer.''
This is when John sent me an email rejecting our offer, and
inadvertently included the entire thread. The email was so
painful and disappointing.
There are so many sad storybook episodes regarding blatant
discriminatory practices, especially against Black firms. In
fact, if you look closer at the minority goals being met today,
you more than likely will find that African Americans who the
DBE program was first written for will have the smallest
percentages, while other groups have benefitted more. Black
professional firms are starting to be an endangered species,
like the bald eagle was.
I do want to bring one barrier that you have the power to
change. That is the formula in determining personal net worth.
It took 22 years before an inflationary adjustment was made to
the personal net worth statement in 2011. It is now almost
another 10 years and counting. The lack of regular inflationary
adjustments could prematurely remove small businesses from the
program.
One idea I have is to exclude retirement savings from the
net worth calculation. Currently, it includes restricted funds
such as 401(k), which disincentivizes a business owner to save
for retirement. So here I am, respectfully asking for your
consideration to remove retirement savings from the personal
net worth calculation.
In conclusion, this program is not a handout. It is a leg
up. It forces big companies and public agencies to play fair.
And, quite frankly, without the DBE program, we would be out of
business at the end date of the last contract in our pipeline.
We should be protected like----
[Microphone unmuted.]
Mr. DeFazio. Somebody is transmitting. Just conclude, then,
Ms. Williams. Thank you, sorry about that.
[No response.]
Mr. DeFazio. OK?
Ms. Williams. Yes, thank you.
[Ms. Williams' prepared statement follows:]
Prepared Statement of Evalynn Williams, President and Chief Executive
Officer, Dikita Enterprises, Inc., on behalf of the Conference of
Minority Transportation Officials
My name is Evalynn Williams. I am the President and CEO of Dikita
Enterprises, Inc., a family-owned minority consulting engineering and
architectural firm headquartered in Dallas, Texas. We celebrated our
40th year in business last November. We provide civil design, program
and construction management, and transit market research as it relates
to public transit planning. We have 40-50 people typically and employ
all nationalities of which many are skilled professionals who are
either woman or are of a minority group. My father, Lucious Williams,
founded the firm in 1979 in Milwaukee Wisconsin and branched to Dallas,
where I was attending college in 1983. I promised him 2 years as his
CFO in exchange for paying off my college loans, which was only $5,000
at the time. That was 36 years ago. We've been partners ever since.
Over the years, especially in the 80 and 90's we have many times been
the first African American firm to be awarded . . . and you can fill in
the blank. Even today, I'm amazed that we continue to be the first
African American engineering firm to prime a contract with public
entities. Many of the firms we began with in the early 80s no longer
exist for various reasons, but mostly because of the lack of
opportunities and resources. We are the oldest African American
professional engineering firm in North Texas.
We offer our services to mainly the governmental sectors, that are
federally, state or locally funded. Our industries include public
transit, highways, aviation, public educational institutions, including
K-12 and higher education, municipalities for roadway and
infrastructure projects. We have worked on multi-billion dollar
projects as well as those under $100,000. We have worked across the
nation providing a variety of services, typically transit planning. We
are certified in 19 locations across the nation. Being certified in
these many areas allow us to participate with transit properties and
provide transit market research. We typically are precluded from
offering engineering services as a DBE in other states because of
certain state laws. Neither my father nor I have a professional
engineering license. We excel in management, marketing and financial
expertise.
I have a BBA degree in information systems and an MBA in
accounting. I serve on several civic boards and have won my share of
awards. I am currently a member of COMTO and the American Public
Transportation Association (APTA), where, in October, I will become the
first African American female to chair APTA's distinguished Business
Members Board of Governors. APTA membership includes at least 90% of
all public transit organizations in North America and practically every
large national commercial firm that does business with public transit
authorities. COMTO, which is the Conference of Minority Transportation
Officials, is the leading national advocate for employment diversity,
inclusion and contracting opportunities in the multi-modal, multi-
billion-dollar transportation industry. Their mission is to eliminate
barriers to maximum participation for minority individuals, veterans,
people with disabilities and certified MWDBE businesses.
In 2010, I became President and CEO of Dikita and my father has
remained active as the Chairman of the Board and Director of Government
Affairs. He owns 51% of the firm and I own 47%, while my oldest
daughter owns 2%. Being trained in accounting and finance, running an
engineering firm has its challenges in of itself. Being a female, an
African American, and a small business in the construction industry has
had many challenges. There are certain systemic stereotypes that are
associated with all the classes of categories I've mentioned, but
typically they all have one thing in common. The idea that women,
African Americans, small businesses, engineering companies ran by non-
engineers--produce an inferior work product. These certainly create
barriers for successfully contracting and being relevant in the
industry. Of all these labels, I think being African American, however,
presents the biggest challenge when competing for work.
Being a disadvantaged business has certainly helped level the
playing field. As the CEO of a 2nd generation African American
engineering and architectural firm, we would never have sustained had
it not been for disparity programs such as the Federal DBE Program.
Competition for prime contracts with the Department of Transportation,
Federal Aviation and Federal Transit is difficult at best, and out of
reach for most minority and women owned businesses (M/WBE).
It is almost impossible for DBE firms to compete with large
national and international firms. They have the capacity and depth
within their workforce and can pull from global office locations. And
over the last 15 years, they have gotten even larger; which makes the
reauthorization of the DBE Program is so extremely critical to firms
such as Dikita Enterprises, Inc. It provides us with opportunities to
join a team as a subcontractor, a prime or joint venture partner, which
in turn helps to build financial capacity and workforce resources. It's
because of this program, Dikita led a joint-venture team with a huge
majority firm to design and build the last 3 miles of rail line for the
Dallas Area Rapid Transit system (DART), saving the agency over $4
million. DART was able to open for revenue service 2 months ahead of
schedule. Sixty-one percent of the team were DBE firms.
The truth is . . . if not for the DBE Program, large corporations
would not share the work and would self-perform 100% of contract-work.
Being called ``disadvantaged'' is not a privilege nor does it sound
like a goal that a company would strive to be. The reality is, without
the program we would not have a chance at fair competition. Quite
frankly, it was embarrassing explaining to my 21-year-old millennial, a
few years ago, why we were considered a disadvantaged business. I can
tell you that an engaging conversation and history lesson spun from
this revelation. Nevertheless, the DBE program is necessary for the
continuing survival of firms such as mine--to feed our families,
educate our youth, and build our communities.
I know for a fact that if it wasn't for the federal and local
equity programs, we would not be able to compete or obtain contracts.
That is evident when you look at private vs. public work. In the public
sector, the large firms that are considered primes, contract with us
only to the extent that it will help them win the project. If the goal
is 25%, then they will typically subcontract only that minimum amount,
even though we are a proven entity. Case in point. We were going after
a project in a small suburban community near Dallas. I found out about
the request for proposal because I had very strong relationships in
that community. Much of the project was within our wheelhouse and we
felt certain we could successfully propose and win. Since there were
parts of the work that others could do better, we reached out to a
nationally known local firm that we had worked with in the past. They
were not aware of the opportunity. What happened later was shocking but
not surprising. In an email thread that was inadvertently sent to me, I
read a discussion that went something like this (all names are
fictitious and are here to make the conversation easier to understand):
John informed his boss Ted that Dikita had inquired about
XYZ company providing service on an upcoming proposal.
Ted asked about the services to be performed and John
explained the services and thought Dikita and XYZ could do well since
they have worked together in the past.
Ted asked about the minority participation goal.
John told him that there was no minority goal.
Ted asked John why they would sub to Dikita.
John reminded Ted that Dikita was very good at providing
these type of specialty services
Ted told John that XYZ was bigger and to dig into the
opportunity.
When John asked about participating with Dikita, Ted told
him that since there was no minority participation, they would just do
the project themselves.
When John questioned Ted again, Ted told him that XYZ was
bigger and to reject our offer.
This is when John sent us an email rejecting our offer
and inadvertently included the entire thread.
This kind of conversation among large majority firms is not unusual
and is a matter of practice. And often we only suspect or hear about
why we were rejected from a third party. However, this was played out
in an email and was so painful and disappointing.
There are many story-book episodes regarding blatant discriminatory
practices that occur to either keep minority firms small or run them
out of business, especially African American firms. Everyone knows that
DBE businesses often live month to month unless we have been successful
in backfilling our pipelines with future projects. One of the most
disheartening feelings is to know that you are only as good as the
current project. We have had many relationships with larger firms and
have provided excellent service, but it's never quite the excellent
services in which you are remembered. We are the token DBE checkbox
that fulfilled the requirement. This I say because I have witnessed the
less than genuine relationships we have forged. We can perform
exceptionally well for many years on a 5-year large project. However, I
notice that when that same large firm is going for the exact project-
type in another state, they will not invite us to the team. When I've
asked about being on the team, the reply is the same, ``we needed you
in Dallas, we will `use' someone else in Houston''. When I question
why, the answer is always ``because you are only useful in Dallas and
taking you to other cities or states doesn't help us to win'', even if
we are the best in providing the services required. It's political.
Well that mentality keeps firms like mine small and confines us to our
own neighborhoods. For us to grow, we need not only to be able to work
in other states, but to work in the private industry. Working for
private developers is typically not an option, hence the need for DBE
program for government projects.
I'd like to talk about another challenge I see with the DBE
Program. While I appreciate the nature of the DBE program, there seems
to be a lack of attention to some of the challenges we face. Still in
existence are discriminatory and other related barriers that pose
significant obstacles for minority and women-owned businesses competing
for federally funded contracts. One such barrier is the lack of regular
inflation-adjustments to the Personal Net Worth requirement for DBE
certification. Unlike the Business Revenue Cap, (which is reviewed and
adjusted periodically by the Secretary of Transportation) it was 22
years before an inflation-adjustment was made to the Personal Net
Worth, increasing the 1989 cap of $750K to $1.3M in 2011. It is
important to note that much like the economy, the personal net worth of
DBE owners and their companies are fluid. The lack of regular
inflation-adjustments stops DBE businesses from growing and could
prematurely remove businesses such as mine from the program. Some folks
think that this $1.3M net worth is vast. If you are a successful
business, you must accumulate a net worth that will allow banks to loan
you money in order to continue upward growth and mobility. But more
importantly, you must save money for retirement. While the formula for
calculating personal net worth excludes our homestead, it does include
your retirement savings. By including restricted retirement savings
into the calculation, it acts to disincentivize a business owner from
saving adequately for retirement. At the end of the day, we all should
have a transition plan and be able to retire comfortably. However, if
most of the dollars I save become retirement assets and those assets
count against me in the certification process, then I'm likely not
encouraged to save but to spend. So, I am asking that the program
exclude retirement savings from the Personal Net Worth calculation.
In conclusion, the disparity and the inequities of our capitalistic
society, coupled with the injustices from America's history of
discriminatory practices against African Americans specifically, are
reasons that DBE program must continue to exist and expand. My dad, my
daughters and I depend on the program to stay in business. This program
is not a handout, it's a leg up. It forces the big companies to play
fair, and quite frankly, if we graduated from the program (and its
sister M/WBE local programs) or the program is dissolved, we would be
out of business at the expiration date of the last contracts in our
pipeline.
Mr. DeFazio. OK, thank you for your testimony and your
suggestion.
Ms. Boyer, you may proceed.
Ms. Boyer. Chairman DeFazio and Ranking Member Graves,
thank you for the opportunity to testify before the committee
today. It is an honor to represent my firm and my colleagues in
the Nation's engineering industry.
And thank you, Representative Davis and Representative
Bost, for that kind introduction.
As you heard, my name is Geri Boyer. I am president and
sole owner of Kaskaskia Engineering Group, headquartered in
Belleville, Illinois. We have DBE certifications in Illinois,
Iowa, Indiana, Kentucky, Missouri, Minnesota, and Wisconsin.
I am testifying today on behalf of the American Council of
Engineering Companies, the business association of the Nation's
engineering industry. ACEC represents nearly 5,500 engineering
companies, nationwide. Our members include very large firms
with tens of thousands of employees as well as hundreds of
small businesses like mine.
I want to communicate three main points to you today: first
of all, DBE programs are essential for helping businesses like
mine compete for work; second, securing certifications in
different States and different jurisdictions can be burdensome;
and three, for professional engineering and design-related
services, it is important to balance DBE considerations with
qualification-based selection procedures.
DBE programs have provided me the opportunity to diversify
and grow my company within the engineering and construction
industry throughout the Midwest. I still encounter
discrimination and the historic effects of discrimination, and
DBE certification gives me the opportunity to compete for
contracts and expand my business opportunities.
If we are going to be able to sustain our profession and
continue to support the transportation clients we serve, it is
imperative that we continue these efforts. Diversification
makes our companies and our industry stronger, and it makes us
more appealing to the next generation of professionals which we
desperately need to recruit. Federal DBE programs are one tool
to bring these goals forward.
However, one challenge for DBE firms like mine that work in
multiple jurisdictions is the lack of a unified approach to DBE
certification. The changes made in MAP-21 to implement a
uniform certification application and reporting forms have been
helpful. All the States I mentioned before use the uniform
application, but they require the entire application again at
different times of the year. The application must be current to
equipment, purchases, loans, and anything else a business uses
to run their day-to-day operation. This creates unnecessary
work for the DBE firm and the public agency, who both have
limited time and budget pressures.
I submitted for the hearing record a white paper I helped
develop with the ACEC Illinois Business Practices Committee. It
goes into greater detail on certification challenges and
potential solutions to streamline and simplify the process.
Lastly, I want to note the intersection of DBE
certification with Federal and State procurement requirements
for contracting for engineering services. Current laws require
agencies using Federal funds to follow QBS, qualification-based
selection procedures, for procuring engineering and design-
related services. Under QBS, agencies select firms based on
their experience, expertise, and demonstrated competence. These
rules apply to federal-aid highway, transit, and airport
improvement programs through various pieces of legislation
approved by this committee over many years, which ACEC strongly
supported.
Current regulations strike an effective balance between the
QBS framework and DBE program goals. Contracting agencies are
required to give consideration to DBEs, but without set-aside
contracts or quotas. State and local agencies set their own DBE
program participation goals and the method for achieving them,
subject to DOT approval, of course. Agencies may use an
evaluation criterion for DBE participation limited to 10
percent of the overall qualifications-based selection criteria,
or they can establish DBE participation goals, which can be
satisfied through good-faith efforts.
ACEC supports this approach. It helps to achieve DBE
program goals, while still emphasizing qualifications as the
preeminent factor in selecting engineering firms. Increasing
the weight of DBE as a selection criterion, or adding specific
set-asides, quotas, or mandates will diminish QBS and the
successful project delivery that it promotes.
Thank you again for the opportunity to testify today. I
will be happy to answer any questions later.
[Ms. Boyer's prepared statement follows:]
Prepared Statement of Geri E. Boyer, P.E., President, Kaskaskia
Engineering Group, LLC, on behalf of the American Council of
Engineering Companies
Chairman DeFazio and Ranking Member Graves:
Thank you for the opportunity to testify before the committee
today. It's an honor to represent my firm and my colleagues in the
nation's engineering industry to you and the members of the committee.
My name is Geri Boyer. I am the President and sole owner of
Kaskaskia Engineering Group, a civil engineering, environmental, and
contracting firm headquartered in Belleville, Illinois.
I am testifying today on behalf of the American Council of
Engineering Companies (ACEC)--the business association of the nation's
engineering industry. ACEC member firms drive the design of America's
infrastructure and built environment. Founded in 1906, ACEC is a
national federation of 52 state and regional organizations representing
nearly 5,500 engineering firms and 600,000+ engineers, surveyors,
architects, and other specialists nationwide.
Firm Profile
I founded Kaskaskia Engineering Group, LLC (KEG) in 2006 with the
mission of making the world a better place through the practice of
engineering. Through partnerships with our clients and regulatory
agencies, we plan, design, and build projects that enhance communities,
spur economic development, and respect the environment. From the
beginning, we have recruited highly skilled employees from a variety of
public and private sector backgrounds. Armed with good experience, a
great reputation and the Disadvantaged Business Enterprise Program, I
have built an impressive portfolio of federal, state, local, and
private project experience. Since 2006, KEG has earned over $100
million in revenue and provides engineering services in Illinois, Iowa,
Indiana, Kentucky, Michigan, Minnesota, Missouri, North Dakota, Ohio,
Oklahoma, and Wisconsin.
KEG specializes in transportation engineering, traffic engineering,
geotechnical engineering, structural engineering, environmental
science, infrastructure analysis and planning, water resource
management, right-of-way acquisition, and general highway construction.
DBE Certifications and DOT Experiences
KEG is a certified DBE through the Illinois Unified Certification
Program, Iowa Department of Transportation, Indiana Department of
Transportation, Kentucky Transportation Cabinet, Missouri Regional
Certification Committee, Minnesota Unified Certification Program, and
Wisconsin Unified Certification Program.
KEG is a certified Women Business Enterprise (WBE) through the
Illinois Central Management Services, Indiana Department of
Administration, Minnesota Central CERT Certification Program, Missouri
Office of Equal Opportunity, Metropolitan Water Reclamation District of
Greater Chicago, and the Women Business Enterprise National Council.
KEG is a certified Small Business Enterprise (SBE) through the
Kentucky Transportation Cabinet and Minnesota Central CERT
Certification Program.
KEG is a self-certified Women Owned Small Business (WOSB) and
Economically Disadvantaged Women Owned Small Business (EDWOSB) through
the Small Business Administration.
In an ever changing and volatile business market, corporate growth
and stability rely on diversification strategies, which often include
providing services to multiple federal, state, and local agencies, as
well as private corporations across regional, national, and
international markets. Diversification has long been a successful
strategy for large businesses, and it is just as important for the
survival and development of small firms.
Using the opportunities that the DBE program has provided, I have
diversified my company within the engineering and construction industry
throughout the Midwest. It's this diversification that has helped me
grow and weather economic storms. But it takes all these certification
programs in multiple states in order for me to have the same
opportunities as non-DBE firms.
One challenge for DBE firms like mine that work in multiple
jurisdictions is the lack of a unified approach to DBE certification.
The amended 49 CFR Part 26 which was included in MAP-21 implemented a
revised uniform certification application and reporting forms. However,
even though there is a uniform process, there is not a uniform
certification. All the agencies I mentioned before use the uniform
application but require the entire application again at different times
of the year. The application must be current to equipment purchases,
loans, and anything else a business uses to run their day-to-day
operation. This creates unnecessary work for the DBE firm and the
public agency who both have limited time and budget pressures. And with
the rising problem of identity theft, it's stressful to be sending all
your personal information to multiple agencies in multiple states.
I encourage the committee to consider additional reforms to
streamline and simplify the DBE certification process, creating a
program that is more efficient and effective for women and minority
firms working for multiple agencies across multiple states.
Qualifications-Based Selection
It's important to note the intersection of DBE program goals with
federal and state procurement requirements for the contracting of
engineering and design-related services. Current laws require agencies
using federal funds to follow Brooks Act qualifications-based selection
(QBS) procedures for procuring engineering and design services. These
rules apply to federal-aid highway, transit, and airport improvement
programs through various pieces of legislation approved by this
committee dating back to 1987. ACEC applauds this committee's
consistent and historic leadership in protecting and expanding QBS
requirements on federal infrastructure programs. Most states have a
``Mini Brooks Act'' that apply the same selection procedures to state
programs.
Under QBS, agencies select firms based on their experience,
expertise, and demonstrated competence for the types of professional
services required. They first evaluate and rank submitting firms'
statements of qualifications, performance data, and information
regarding the proposed project or services. The contracting agency then
selects and ranks firms based on those qualifications in accordance
with the established/advertised criteria for the project and negotiates
with the most highly qualified firm to arrive at a fair and reasonable
price for the solicited services.
QBS is the gold standard for procurement of professional
engineering and design services. It helps small and DBE firms compete
for work by providing us a forum to demonstrate the advantages we often
have, including niche market expertise, ability to be nimble to meet
deadlines, local knowledge, and involvement of senior level management.
Quantitative studies have shown that QBS lowers total project costs and
results in more satisfactory outcomes for owners.
Current Federal Highway Administration (FHWA) regulations strike an
effective balance between the QBS procurement framework and DBE program
goals. Contracting agencies are required to give consideration to DBE
consultants in the procurement of engineering and design related
services contracts using federal-aid funds, but without set-aside
contracts or quotas for DBE participation. State and local agencies set
their own DBE program participation goals, as well as the method for
achieving them, subject to FHWA approval. To the extent practical, a
contracting agency must achieve DBE program participation goals through
race and gender-neutral measures. DBE participation on all contracts
funded with federal funds, whether for professional or construction
services, may be counted toward overall DBE program participation
goals.
FHWA regulations provide that when overall DBE program
participation goals cannot be met through race-neutral measures,
additional DBE participation on engineering and design-related services
contracts may be achieved through either (1) the use of an evaluation
criterion for DBE participation in the qualifications-based selection
of firms, or (2) establishment of a contract DBE participation goal.
Prime contractors can satisfy these measures through good-faith efforts
to engage DBE participation.
In its policy guidance, FHWA states that in order to ``harmonize''
QBS rules and DBE program implementation, a contracting agency may
establish the use/participation of certified and qualified DBE firms as
an evaluation criterion of no more than ten (10) percent of the total
evaluation criteria in assessing the qualifications of firms/teams to
perform the solicited services.
ACEC supports this current approach. It helps to achieve DBE
program goals while still respecting the importance of emphasizing
qualifications as the preeminent factor in selecting engineering firms.
Increasing the weight of DBE as a selection criterion or adding
specific set-asides, quotas, or mandates will diminish QBS and the
successful project delivery that it promotes.
ACEC Diversity and Inclusion Initiatives
Lastly, I want to draw the committee's attention to the new
Strategic Plan that ACEC approved in October 2019. Embodying inclusion
and diversity is one of the five pillars of the new plan. Our express
goal is that the Council is recognized as a welcoming organization
where all members are included, involved and can achieve their full
potential. The objectives include improving the diversity of ACEC
leadership, enhancing the diversity of our membership, and increasing
engagement of diverse individuals from member firms.
If we're going to be able to sustain our profession and continue to
support the transportation clients we serve, it's imperative that we
deliver on these goals. Diversity makes our companies and our industry
stronger, and it makes us more appealing to the next generation of
professionals who we need to recruit. Federal DBE programs, as explored
by this hearing today, are one tool to help firms like mine bring those
goals forward.
I want to close by inserting here the statement that the Council
made earlier this year, which encapsulates how I personally feel and
what I strongly support about the engineering industry.
``ACEC is committed to an inclusive and diverse engineering
industry.
The engineering profession has always been grounded in
integrity, fairness, and service to community. Engineers build
communities. We create space and by extension, we create social
experience. We support equality and respect for all humankind.
We believe in providing equitable opportunities within our
profession to support untapped potential both within our
workforce and within the communities we serve. And we have the
power to foster progress by breaking down the physical barriers
that can inhibit economic and social equity.
Those are the principles that have guided our community
through this difficult time. Through ACEC we will embrace
inclusion and diversity and continue to focus our members on
ways to lift people up to become their best selves and to make
our companies models of the values we embrace.''
Thank you again for the opportunity to testify.
attachment
National Unified DBE Certification Program
a white paper by ACEC Illinois
Business Practices--DBE/WBE/MBE Committee
Authored by: Geri E. Boyer, P.E., Kaskaskia Engineering Group, LLC
June 2016
Last update: 6/25/2020
Introduction
In an ever changing and volatile business market, corporate growth
and stability rely on diversification strategies, which often include
providing services to multiple federal, state, and local agencies, as
well as private corporations across regional, national, and
international markets. Diversification has long been a successful
strategy for large businesses, but it is just as important for the
survival and development of small firms.
Firms owned by women and minority group members that want to employ
diversification strategies are encumbered by the current DBE
Certification process. Public agencies and small business owners have
limited time and continued budget pressures. Time and budget
constraints have significantly affected DBE certification in Illinois
and its surrounding states. This white paper discusses how a national
unified program could strengthen, streamline, and simplify the DBE
certification program, creating a program that is more efficient and
effective for women and minority firms working for multiple agencies
across multiple states.
Background
History of DBE Program
A policy of helping small businesses owned and controlled by
socially and economically disadvantaged individuals, including
minorities and women, participating in contracting opportunities
created by Department of Transportation (DOT) financial assistance
programs, has been in effect for more than 20 years. The Department,
through its Operating Administrations, distributes billions of dollars
annually to help finance thousands of projects across the country.
Approximately 85 percent of the assistance dollars is for construction.
The major portion of construction funds are allocated to state highway
and transportation agencies for highway construction. The balance is
provided to local public transit and airport authorities for mass
transit and airport facilities.
In 1983, Congress enacted the first Disadvantaged Business
Enterprise (DBE) statutory provision, which applied primarily to small
minority-owned firms. This provision required the Department to ensure
that at least 10% of the funds authorized for the highway and transit
Federal financial assistance programs be expended with DBE's. In 1987,
Congress re-authorized and amended the statutory DBE program to, among
other changes, add women to the groups presumed to be disadvantaged.
Since 1987, the DOT has established a single DBE goal, encompassing
both firms owned by women and minority group members.
Primarily three major DOT Operating Administrations (OA's) are
involved in the DBE program. They are the Federal Highway
Administration, the Federal Aviation Administration, and the Federal
Transit Administration. The DOT DBE program is carried out by state and
local transportation agencies under the rules and guidelines in the
Code of Federal Regulations (Title 49, Part 26). The FAA also maintains
a separate DBE program for concessions in airports (Title 49, Part 23).
Title 49, Part 26 of the Code of Federal Regulation (49 CRF part
26) required all agencies in each state receiving DOT funds to
participate in a state Unified Certification Program (UCP). Within
three years of March 4, 1999, recipients of DOT funding had to sign an
agreement establishing the UCP for that state and submit the agreement
to the Secretary for approval. The agreement provided for the
establishment of a UCP, which met all the requirements. The agreement
had to specify that the UCP would follow all certification procedures
and standards; that the UCP would cooperate fully with oversight,
review, and monitoring activities of DOT and its operating
administrations; and that the UCP would implement DOT directives and
guidance concerning certification matters. The agreement also committed
recipients to ensuring that the UCP has sufficient resources and
expertise to carry out the requirements.
DBE Unified Certification Program (UCP)
The purpose of the UCP is to provide ``one-stop shopping'' to
applicants for certification. The program was designed so that if a
firm was certified using a UCP agency in a state, they would only have
to apply to one federally-funded agency within that state to work with
all UCP member agencies. In Illinois, the UCP is made up of five US
DOT-funded agencies, the Illinois Department of Transportation (IDOT),
City of Chicago, Chicago Transit Authority (CTA), Metra, and Pace. The
Regional Transportation Authority (RTA) is also part of the IL UCP, but
is a non-certifying agency. Other states have very similar programs
made up of all agencies that receive federal funds.
Non-DOT-funded Certifying Agencies
Within every state, there are also non-DOT-funded agencies. Some
will accept the DOT's state implemented DBE Certification Program, and
some have their own certification process. Several non-DOT-funded
agencies have chosen to certify women business enterprises (WBE),
minority business enterprises (MBE), and Business Enterprise owned by
People with Disabilities (BEPD). In Illinois, the non-DOT-funded
certifying agencies are Central Management Services (CMS), City of
Chicago, and Cook County.
Interstate Certification Rule
While the DBE program was always a national program, state specific
administrative requirements tended to impair a DBE firm's ability to
fully compete for business opportunities in other states. In response
to longstanding concerns from the DBE community, the USDOT issued a
proposed rule aimed at breaking down these barriers. On January 1,
2012, the interstate certification provision (49 CRF 26.85) went into
effect. Its intent was to clear up administrative obstacles to
certification that were undermining important program objectives. The
rule furthered the following fundamental objectives of the DBE program.
(1) Facilitated the ability of DBE firms to compete for DOT-
assisted contracting.
(2) Reduced administrative burdens and costs on small businesses
that sought to pursue contracting opportunities in other states.
(3) Fostered greater consistency and uniformity in the application
of certification requirements, while maintaining program integrity.
The ultimate purpose of the interstate certification rule was to
facilitate certification of currently certified firms in other
jurisdictions. Interstate certification was not meant to be an
automatic reciprocity in the sense that each state must honor the other
states' certification decisions without review. Rather, the rule
created a rebuttable presumption, such that a firm certified in its
home state is eligible to be certified in other states to which it
applies.
The Department once again amended 49 CFR Part 26, which went into
effect on November 3, 2014. The final rule improved DBE program
implementation in the following three major areas.
(1) Revised the uniform certification application and reporting
forms and created a uniform personal net worth form for use by
applicant owners, which collect the data required by the Department's
Surface Transportation Reauthorization, Moving Ahead for Progress in
the 21st Century Act (MAP-21).
(2) The rule strengthened the certification-related program
provisions, which includes adding a new section authorizing summary
suspensions under specified circumstances.
(3) The rule modified several other program provisions concerning
such subjects as overall goal setting, good faith efforts, transit
vehicle manufacturers, and counting for trucking companies.
Problems
Over the last several years, the DOT has made a concerted effort to
improve the DBE program. Many hurdles have already been overcome, but
there are still problems to be solved to make this program even more
useful to small businesses owned and controlled by socially and
economically disadvantaged individuals. Problems that are burdensome
and limit the success of a DBE company are 1) Confusion between DBE
Certification and Prequalification, 2) Duplication of Applications for
DBE Certification, and 3) Slow Responsiveness of Reviewing Agencies.
The following are a few examples to support the need for additional
changes to the DBE program.
1) Confusion between DBE Certification and Prequalification
The Bureau of Small Business Enterprises administers IDOT's DBE
program. IDOT, like all other state DOT's, is tasked with the
certification of DBE firms and the prequalification of firms wanting to
bid on contracts and/or offer their services to the department. DBE
certification and DOT prequalification are performed by two different
units within IDOT. While there is some overlap in the certification and
prequalification processes for DBE firms, the certification process is
generally concerned with establishing if a business qualifies as
``disadvantaged,'' and the prequalification process confirms if an
applicant has resources and experience to self-perform each specific
service. If you are a DBE engineering/architectural consultant, you are
certified as a DBE through the Bureau of Small Business Enterprises and
prequalified through the Bureau of Design and Environment. The Bureau
of Design and Environment prequalifies firms in multiple categories of
service.
If you are a DBE contractor, you are certified as a DBE through the
Bureau of Small Business Enterprises and prequalified through the
Bureau of Construction. The prequalification process of a contractor is
governed by Title 44 Illinois Administrative Code Section 650. The
prequalification process does not apply to subcontractors. However, DBE
subcontractors are required to be certified through the Bureau of Small
Business Enterprises but only need to be registered through the Bureau
of Construction to perform work for IDOT.
Currently, the Bureau of Small Business Enterprises utilizes the
uniform certification application and forms required in the final rule.
These forms require the applicant to fill out a listing of NAICS codes
for which they are able to self-perform. The NAICS codes are used on
the UCP online directory and generally correlate with the
prequalification categories. However, the Bureau of Small Business
Enterprises has taken on the responsibility of prequalifying
subcontractors through the certification process. Instead of verifying
NAICS codes, they are verifying the resources and experience of a DBE
subcontractor to complete an IDOT specific contract pay item. They are
also certifying DBE subcontractors/contractors in work classifications
that are not in alignment with the Bureau of Construction. These
additional requirements are limiting the expansion of DBE
subcontractors/contractors.
2) Duplication of Applications for DBE Certification
The Illinois Department of Central Management Services (CMS)
Business Enterprise Program (BEP) is now certifying businesses owned by
women, minorities, and persons with disabilities. They claim that with
their certification a company will have the opportunity to participate
in the State's 20% minority, female, and persons with disabilities
goal. Also, a company would be listed in their BEP directory that is
used by state agencies, universities, and other large firms when they
are looking for businesses owned by females, minorities, and persons
with disabilities. This program's eligibility is available to companies
whose gross annual sales are less than $75 million, which far exceeds
the limit of $23.98 million in gross annual receipts required by the
new federal form and exceeds the Small Business Administration size
standard for all transportation-related industries.
CMS states that if a firm is currently certified with the City of
Chicago, Cook County, Chicago Transit Authority, METRA, PACE, IDOT,
Women Business Development Council, or Chicago Minority Business
Development Council, you can complete the Recognition Certification
Application to qualify for the ``limited'' Business Enterprise
Certification. CMS also offers the BEP Full Certification Application,
which effectively requires the same information as the UCP, but with
different forms. Both of these application processes certify businesses
as MBE, FBE, Female and Minority Business Enterprise (FMB), and/or
Persons with Disability Business Enterprise (PBE). Although a firm may
choose to be certified by CMS using the recognition certification, this
certification is not considered a valid certification by agencies in
other states.
For example, the Indiana Department of Administration only
recognizes CMS as the official M/WBE certifying agency for the State of
Illinois. As part of their application, the Illinois firm must provide
a copy of the Illinois certification conducted by CMS. If the firm was
initially awarded certification by IDOT and the firm used the CMS
Recognition Certification, the firm cannot apply for M/WBE
certification with the State of Indiana through the Indiana Department
of Administration. Also, the Indiana Minority & Women's Business
Enterprise Division does not accept onsite reports from the City of
Chicago, PACE, Metra, the Chicago Transit Authority, or the Chicago
Minority Business Development Council, making the ability for an
Illinois DBE firm to work in Indiana as an M/WBE firm very difficult.
The City of Chicago is a member of the IL UCP, which certifies DBE
firms.
The City also has the following certifications:
MBE
WBE
Business Enterprise owned by People with Disabilities
(BEPD)
Airport Concession Disadvantaged Business Enterprise
(ACDBE)
The MBE/WBE/BEPD certification is needed to work on city-funded
contracts and the DBE/ACDBE certification is needed to work on state
and federally funded contracts. If a woman-owned DBE firm that is
already certified through the IL UCP and CMS wants to work on a city-
funded project, the firm must also apply to the City of Chicago's WBE
program.
3) Slow Responsiveness of Reviewing Agencies
The goal of the DBE program is to give individuals who own
disadvantaged businesses the opportunity to grow their business. DBE
firms are taking advantage of the goals of the DBE program and looking
for opportunities to expand their businesses outside of their home-
based state. A single firm could apply to as many as 50 DBE offices,
which places additional burden on certifying offices. Additionally, as
state DOTs replace and/or reduce staff the burden increases.
State personnel are struggling to review the applications for home-
based firms in a timely manner. Adding a maximum 60 day determination
period for non-home-based firms set forth in 49 CRF 26.85 is creating
an impossible situation for reviewing agencies. There have been cases
in which it has taken over a year to issue a DBE certification.
Solution
A proposed solution is to create a National Unified DBE
Certification Program (National UCP) to serve as a ``one-stop
shopping'' to applicants for certification. Any state agency using the
unified certification application could be a coordinating member of the
National UCP, and its certification would be recognized as a National
UCP. Under a National UCP, the firm applies one time for certification
as DBE with their participating cognizant agency or a national
organization. If approved, that certification would be honored by all
recipients of federally funded and non-federally funded projects in all
states. The National UCP would only certify firms using the unified
certification application. Prequalification, determination if an
applicant has the requisite resources and experience to complete the
service/category as required, would remain with the contracting agency.
The certification and record would be held by a national agency/
organization, such as the Small Business Administration (SBA). The SBA
already have systems in place to review a standard application,
evaluate its compliance with federal regulations, and certify its
credibility. It currently is certifying Women Owned Small Business
(WOSB), 8(A), and HUBZone. It has the capacity for the upload of
documents necessary for annual renewal (Affidavit of Continued DBE
Certification). This process would significantly reduce the time and
effort necessary to become licensed in multiple states.
B2GNow, a cloud-based software system for real-time collection,
tracking and analysis of compliance data, currently maintains
compliance of DBE firms with federal, state, and local diversity
programs. It is a tool that could serve as a DBE certification record
holder for federal and state agencies to utilize.
Certifying agencies that do not use unified certification
application or do not choose to be a coordinating member of the
National UCP could continue to certify DBE. If a firm does not intend
to work with multiple agencies in multiple states, it might not be
advantageous to certify with a national organization. A certified firm
that had been certified by a non-coordinating local certifying agency
could still apply to have their record held by the national
organization.
Although this White Paper is focused on DBE firms certified to do
engineering and contracting, any type of DBE business could benefit
from a National UCP.
Sources
``Disadvantaged Business Enterprise (DBE) Program.'' United States
Department of Transportation, n.d. Web. 08 March 2015.
``Final Rule Changes Effective as of November 3, 2014.'' United States
Department of Transportation--Departmental Office of Civil Rights, n.d.
Web. 8 March 2015.
Indiana Department of Administration Division of Supplier Diversity,
Application for Certification, n.d. Web. 1 March, 2015
``Small Business Size Standards'' US Small Business Administration,
n.d. Web. 1 March, 2015
Mr. DeFazio. Thank you, Ms. Boyer.
Ms. Lerdahl, you may proceed.
Ms. Lerdahl. Good morning, Chairman DeFazio and committee
members. My name is Mary Lerdahl, currently the owner of
Emerald Consulting Services in the Seattle area.
Prior to starting my firm to help DBEs navigate the
challenges of the construction industry, I was an electrical
contractor for 22 years. I started my firm, DBE Electric, in
2009 during the Great Recession, after losing my share of
another company as the result of a marital dissolution. The
firm DBE Electric performed 122 projects valued at over $80
million over the course of 9 years, until I was forced out of
business as a result of WSDOT, Washington State Department of
Transportation's, waiver to exclude White women from the DBE
program.
The waiver was approved by U.S. DOT in 2016 after, in my
opinion, a faulty disparity study that included projected
revenue from the two largest mega-projects in Washington State
history.
From the time the waiver was enacted in June 2017 to mid-
2018, my firm's revenues went from $9 million a year to zero.
Without the designation of a DBE, I couldn't win a single
project, even with my successful track record. I was the only
female contractor in the State that performed complex, heavy
highway electrical projects, traffic signals, illumination,
intelligent transportation, and tolling systems.
By September of 2017, a new disparity study showed that
White women were not over-represented, and WSDOT asked U.S. DOT
to rescind the waiver on September 11, 2017.
I personally made two trips to Washington, DC, to meet with
U.S. DOT, the Federal Highway Admnistration, and Terence
Coleman of the Department of Assistant General Counsel, all to
no avail. When U.S. DOT finally denied WSDOT's request to
rescind the waiver on December 13, 2019, it was far too late to
save my business and the businesses of other White women in our
State.
Because of the DBE program, I participated in building the
SR 520 floating bridge, the longest floating bridge in the
world, with Kiewit. The contract was a design-build project,
and my contract value was $14 million. It was a great example
of how a small DBE firm like mine could work together with a
large prime contractor to grow, learn, and build a project that
all contractors could be proud of.
At the same time as I was building the bridge project, I
was also working on the SR 99 Bored Tunnel project, valued at
$1.6 billion, with Seattle Tunnel Partners, the joint venture
with Dragados and Tutor-Perini. I have experienced many
incidents, overt and subtle, of discrimination in many years,
but this one was the worst. Shortly after winning the tunnel
project, Tutor-Perini purchased Fisk Electric, a large firm out
of Houston.
At an initial DBE outreach meeting, a Fisk representative
blatantly stated that they were only interested in receiving
labor-only bids from DBE firms, thus exposing the DBE firms to
more risk and less profit from the less risky material
purchases portion of the work. A local subcontractor, JH
Kelley, was brought in to sub out to the two electrical firms
owned by the joint venture--Fisk being owned by Tutor-Perini,
and SICE, being owned by Dragados in Spain--to minimize the
appearance of self-dealing.
While my firm ultimately performed $977,246 of work on the
project, public records show that SICE performed $34,315,556,
and Fisk performed $106,057,656. STP solicited bids from DBE
firms like mine in order to show good faith efforts, only to
self-perform much of the work.
I experienced sexual advances while on the project site,
while supervising my crews.
Getting paid was slow and difficult, and begging was
necessary, as they always had some excuse. They needed two
signers, who were rarely both there, for example.
Finally, while my firm was working on a change order to
convert temporary generator power to permanent power feeding
refrigerated shipping containers, I experienced discrimination
at the hands of Mike Kerschner, a project manager for Tutor-
Perini. He was pressuring me to proceed with ordering expensive
Siemens electrical gear, but my change order hadn't yet been
signed for that work, and STP owed me over $80,000. It was very
past due.
I put in a call to the local electrical union for an
electrician to do the power cutover, but the union wouldn't
fill my call for labor. I met with Mike Kerschner face to face
to discuss the ongoing failure of the union to respond to my
call. And after looking me up and down in a sexually suggestive
manner, he informed me that if I didn't have labor on the job
the next day, he would take over my work.
The next day my crews were shut out of the job, and my
equipment was taken over. I also received a letter from the
union that day, pulling manpower from all of my jobs, including
the bridge project. Fortunately, Kiewit intervened, and didn't
allow that to happen, so my company lived to see another day. I
later learned that Fisk took over my work, and that Tutor-
Perini had colluded with the union to make this happen.
My firm finally got paid the $80,000 owed by STP, only
because of a Federal Highway Administration investigation into
WSDOT's mishandling of the DBE program and the project.
Tutor-Perini has been found guilty of DBE fraud on several
occasions across the country, and has paid millions of dollars
in fines. In my opinion, the only reason Tutor-Perini hasn't
been disbarred from Federal contracting is because of the
powerful connection between this company and a certain U.S.
Senator.
In closing, the DBE program is essential to allow small
firms owned by women and minorities to compete for a few
pennies of the highway dollar. However, it must be administered
with strict compliance, starting with the Federal Highway
Administration's enforcement of CFR part 26.
State and local programs' field compliance need to start
from the bottom up, listening to the DBE firms and the field
inspectors from each agency, instead of from the top down, so
the issues can be resolved as soon as possible to avoid
business failure due to nonpayment and discrimination during
disputes.
Waivers should never again destroy a DBE firm, separating
the DBE communities.
Unfortunately, due to human nature, discrimination will
probably always be with us. But this program is effective, and
the committee has an opportunity to strengthen it and make it
more accountable and transparent to participating firms and
taxpayers. Thank you for the opportunity to share my story, and
I would be happy to share any other information you would like.
Thank you.
[Ms. Lerdahl's prepared statement follows:]
Prepared Statement of Mary T. Lerdahl, President, Emerald Consulting
Services, LLC
Good morning Chairman DeFazio and members of the Committee:
My name is Mary Lerdahl and I formerly owned an electrical
contracting firm in the Seattle area named DBE Electric. I started the
firm in November 2009 during the ``Great Recession'' after losing my
share of a similar firm as a result of a marital dissolution.
Altogether I had been an electrical contractor since 1996, for a total
of 22 years before I was driven out of business as a result of WSDOT's
(Washington State Department of Transportation) decision to waive white
women out of the federal DBE program. My company focused exclusively on
highway electrical projects; traffic signal systems, illumination,
Intelligent Transportation Systems. From 2009 to 2018 (the year the
company closed) my firm successfully completed 122 projects valued at
nearly $80 million. My firm never failed to complete a project on time
and finished all contracted projects with the exception of two, which
were the result of blatant discrimination, which I will explain later
in greater detail. The typical size of projects performed were
$500,000-$2,000,000.
The highlight of my career was building the SR 520 Floating Bridge
project, a design build project with Kiewit, the longest floating
bridge in the world. The overall project was about five years long;
about 2 years in design and 3 years in actual construction. The initial
contract was $8.9 million with the final contract value being $14
million. This project had an 8% mandatory DBE goal, which is why my
firm had a ``place at the table'', along with my company's proven track
record of projects with Kiewit and other firms. I learned so much from
that project, both technically as well as what it was like to ``work
with the big boys''. As doors opened to me because of my certification
as a DBE firm, I could see a bright future ahead for my company after
the successful completion of the project.
Kiewit treated me fairly and with respect and was a good example of
how a mega firm and a small, DBE firm could work together to build a
great project that all parties could be proud of.
At the same time I was working on the design portion of the bridge
project, I was working on the SR 99 Bored Tunnel project with Seattle
Tunnel Partners, (STP) a joint venture between Tutor-Perini and
Dragados.
The project had a value of $1.6 Billion and a 8% DBE Condition of
Award goal.
Initially my firm worked as a second tier subcontractor to one of
the larger local general contractors, and then directly for STP. The
contrast between Kiewit and STP couldn't be more stark. My firm faced
discrimination in many ways throughout my 2 year experience on the
tunnel project, finally culminating in a meeting required by WSDOT as a
result of the Conciliatory Change Order required by FHWA after an
investigation by FHWA showed widespread discrimination by STP against
DBE firms. Some of the specific instances of discrimination that I
personally suffered and my firm experienced are as follows:
1. Initial DBE ``outreach'' meetings in which Fisk Electric, a
large electrical contracting firm purchased by Tutor-Perini shortly
after winning the project, stated outright that they were only
interested in ``labor only'' bids from DBE firms, thereby denying DBE
firms the opportunity for profit on the less risky material purchases
portion of the project.
2. Sexual advances made directly to me by STP supervisors while I
was in the field supervising operations.
3. Slow payment processing and a feeling of ``begging'' to get
paid during the direct visits to STP's offices because of intentionally
slow payment processing; for example, two check signers who were hard
to track down, no option for ACH payments, delayed processing of change
orders while being demanded to perform work by STP supervisors prior to
the change orders being executed.
4. Invitations to bid electrical systems inside the tunnel that
were virtually identical to the work I was performing on the bridge
project just to provide ``good faith efforts'' and allow SICE, an
electrical firm owned by Dragados, to self-perform the work. My firm
wasted countless hours bidding this design-build work when STP knew all
along that they would never use my firm to build the work.
5. The final incident occurred when my firm was working to convert
electrical power from temporary diesel generators to provide power to
the refrigerated containers being unloaded at the Seattle waterfront to
permanent power. Since my crews primarily worked on signal systems, I
put in a call to the local IBEW (electrical workers) union for a call
for a journey level electrician with experience with such work; the
union failed to fill my call for labor and after a week without getting
my call for labor filled I had a meeting with the project
superintendent, Mike Kerschner to discuss the situation. At this time
there was a pending change order for $200,000 with specialized Siemens
equipment that I wasn't going to order the equipment until the change
order was approved. Mike Kerschner had been pressuring me to order it
anyway without a change order but I refused. When I met with him
regarding the power conversion issue due to the union's continued
failure to supply the requested labor, he was openly hostile to me
while at the same time giving me unwanted top to bottom looks that were
sexual in nature. He informed me that if I didn't get the needed labor
that he would take over my work. The next day I received a letter from
the IBEW stating that they were pulling all manpower off ALL of my jobs
because I had failed to make a trust payment, which was only two weeks
late due to STP's failure to pay my company. The union was colluding
with STP and Fisk Electric to drive my firm off the tunnel job, and
there were other large electrical contractors who were hoping to take
over my SR 520 Floating Bridge Project. Fortunately Kiewit didn't allow
that to happen, so the outright destruction of my business didn't
happen at that time. In retrospect I realize that my firm was a threat
to the assertion that DBE firms didn't have the technical expertise to
perform on such a large, technically challenging projects because I was
doing just that across the water. By the time I was locked out of the
job STP owed my firm over $80,000 and I am certain that the only reason
I eventually got paid was because of the focus of FHWA's investigation
into STP and WSDOT's administering of the DBE program. Public records
show that SICE, Inc. did $34,315.556.53 on the project and Fisk
Electric did $106,057,656.02, while my firm, DBE Electric did
$977,246.59. Both SICE and Fisk were hired by a local company, JH
Kelley, in order to minimize the appearance of the self-dealing by
STP's ownership of Fisk and SICE. It is widely known that Tutor-Perini
has been found guilty of DBE fraud in other areas of the country and
has paid millions of dollars in fines; our state simply wasn't prepared
to handle the assortment of dirty tricks that Tutor-Perini pulled in
order to line their own pockets while appearing to be employing ``good
faith efforts'' among the DBE firms who were hoping for a piece of the
pie.
While the SR 99 Bored Tunnel was one of the worst examples of
discrimination I experienced, it certainly wasn't the only one. I could
spend hours citing examples, but since my time for testimony before the
committee is limited, I will share just one more in detail. My firm was
working on a city project that had federal funds administered through
WSDOT Local Programs. The contract value was approximately $1.2
million. The general contractor was falling behind the critical path
schedule as originally submitted and approved by the city, and changed
the schedule to place the blame for the delays on my firm. When I
challenged the project manager and eventually the company president
regarding the disputed schedule and delays, they didn't want to meet
with me, only with my male project superintendent. The dispute few
uglier by the day, and resulted in the general contractor failing to
pay my firm nearly $300,000 at one point. The general contractor sought
to have my contract terminated, and WSDOT became involved in their
request in accordance with CFR Part 26 rules. In the interim, the
general contractor contacted my main pole supplier and threatened not
to pay for the $500,000 pole order if they placed it with my firm. Due
to the on-going hostilities WSDOT allowed the contract to be
terminated, but only for convenience, not for cause. I then brought
suit again the contractor and eventually was awarded the $300,000 owed
and attorney's fees after 3 years of legal battles. I know that the
only reason this situation wasn't able to be resolved without
litigation was because I am female and stood up for my company. I had
done business with this company before when I was in business with my
ex-husband, and when issues came up as they do in construction, they
were able to be resolved, ``man to man''. Not so when I was the
principal. The general contractor even stated in front of WSDOT
attorney's during meetings to resolve the issues that ``the only reason
he hired me was because he had to make the goal''. I'd also like to
mention that this man himself was a minority and had been in the DBE
program before graduating from the program. He was openly hostile to
women in the construction industry, unless they worked in the office,
not in the field and certainly not being an owner herself.
There are many other instances of outright and subtle
discrimination that I could cite, but unfortunately the worst was when
the agency that was supposed to help firms like mine actually caused
the destruction of my business by enacting the waiver to exclude white
women from the federal DBE program in Washington State. When the waiver
was enacted in June 2017 after being approved by Secretary Foxx on
December 16, 2016, my firm was doing approximately $8,000,000 in
revenue. After June 2017 when my firm was no longer considered eligible
for ``Condition of Award'' projects with DBE goals, I did not win one
single bid, including several that I knew I was the low bidder for.
This is when the full knowledge of the level of discrimination in the
highway construction industry really sunk in. I had fought battle after
battle for years, but surely I thought that my company's proven track
record of successful projects would see me through this unfortunate and
unfair period, but I was dead wrong. I did everything I could to get
work, begging contractors to use me on their projects. I had been the
only female electrical contractor doing major highway electrical
projects, and now the ``good ole boys'' were making up for lost time
getting on projects that I formerly might have won. When WSDOT excluded
my firm from participation, those project dollars didn't go to another
DBE firm; they went to larger firms in our region doing $50-600 million
in annual revenues! In the space of 18 awful months, my company died a
death of a thousand cuts as I watched my firm die, month after month. I
had to lay off my daughter, whom I had hoped to pass the company on to,
along with other family members and employees. Word spread at the IBEW
union that my company was going to go under, so getting quality labor
dispatches to finish my jobs was extremely difficult. I could have
easily filed for bankruptcy but I wanted to finish my projects and
cause as least amount of collateral damage as possible for my
employees, general contractors with which I had project backlog with,
and the public agencies who were counting on the projects to be
finished. By the fall of 2018 it was finished and there was nothing
left to show for my years of hard work except exposure to creditors due
to the personal guarantees typically required by DBE firms due to
credit discrimination. During the period of the demise of my business I
made two trips to Washington DC to meet with FHWA and USDOT to plead
for WSDOT's request to rescind the waiver dated September 13, 2017. I
met with Terence Coleman of the Department of Assistant General Counsel
to share how this delay in responding affirmatively to WSDOT's request
to rescind the waiver was causing my business failure, along with many
other women in the region, all to no avail.
Finally on December 13, 2019 USDOT denied WSDOT's request to
rescind the waiver; while the reasons cited speak for themselves, there
is no mention whatsoever of the skewing of the 2009-2011 data included
in the flawed study, which included both the DBE awarded dollars of the
two largest projects in Washington state history (SR 99 Bored Tunnel
and SR 520 Floating Bridge) as well as documented DBE fraud purported
by a white woman trucking firm that was eventually decertified as a DBE
firm by WSDOT.
In summary, while I am a positive person, I am also a realist. I
had hoped to see discrimination end during my lifetime, unfortunately
it seems to be getting worse in our society. While one can only change
oneself to be a fair and just person, we can't change human nature.
This committee through the federal DBE program has an opportunity to
make a big difference in small DBE firms. I don't think it's realistic
to expect to ``level the playing field'', but it is realistic to make a
significant impact and hold to account the large general contractors
who complain about the DBE contracting community getting a few pennies
of the federal contracting dollar. While it is too late for my firm to
benefit from the return of white women as Condition of Award as of
October 1, 2020, I am determined to do all that I can to coach and
mentor DBE firms as they navigate the difficult construction industry
and avoid being used and abused by some of the unethical prime
contractors who seek to abuse ``good faith efforts'' for their own
gain.
I had hoped to participate in building the Interstate Bridge
Replacement program, replacing the aging bridge connecting Washington
and Oregon after my successful completion of the SR 520 Floating
Bridge. When I left Oregon as a young girl in 1968 to move to
Washington with my mother and younger siblings she related that I said
``Seattle is my town'' when I saw the Space Needle. Now instead of
helping to build a physical bridge, I hope that I can use my experience
to build a bridge between DBE firms and the good general contractors
like Kiewit that do believe in this program to help empower DBE firms
to grow in the way that the DBE program was intended for.
Thank you for your time.
Mr. DeFazio. Thank you, Ms. Lerdahl.
Mr. Ali, you may proceed for 5 minutes.
[Pause.]
Mr. DeFazio. You have to unmute.
Mr. Ali. Oh, sorry. Oh, am I unmuted?
Mr. DeFazio. You are unmuted now.
Mr. Ali. I apologize for that, Chairman. I have my own
feelings about Cisco.
Chairman DeFazio, thank you, and members of the committee.
My name is Farad Ali, chairman of the advisory Government
Affairs Committee for the Airport Minority Advisory Council. I
am also the immediate past chairman of the Raleigh Durham
International Airport Authority. Thank you for providing AMAC
the opportunity to participate in the committee's hearing
today.
AMAC was founded 36 years ago to combat discrimination in
the airport industry. Since its founding, AMAC has been in the
forefront of every national policy discussion concerning this
ubiquitous nature of discrimination in the transportation
industry, and in particular, concerning airport contracting
opportunities for small and disadvantaged business enterprises.
AMAC's members include DBEs and airport concessionaire
DBEs, non-DBEs, airports, and airport officials, and all others
who are committed to promoting diversity and inclusion in the
airport industry.
The DBE authorization by Congress is vitally needed to
combat conscious and unconscious bias and institutional
discrimination that, regrettably, minority and women
entrepreneurs too often face. To be sure, steady progress has
been made. However, our DBEs and ACDBE members regularly attest
that, without the DBE program, they would be locked out of
contracting opportunities.
Having served in many capacities with AMAC, as board chair,
and committee chair, and as an airport commissioner, I too have
had my own direct observation about the additional work to be
done.
In addition, anecdotal accounts, like academic papers and
data from recent disparity studies, further document the
continuing challenge of racial and/or gender bias barriers to
full participation. They also point to the ongoing need for a
DOT DBE program.
AMAC works consistently with Congress, the U.S. DOT,
Federal Aviation Administration, aviation trade organizations,
and others, as a resource to provide education and guidance
concerning these public policies and best practices to redress
discrimination and further diversity and inclusion issues.
Often we are unwilling to, really, have candid
conversations and discussion about discrimination. But its
ongoing present-day manifestations are real.
With regard to the Government's interest in battling
discrimination, equality is a core value of our Constitution,
and fairness also yields great societal benefits.
Although there has been growth in a number of minority- and
women-owned firms in the United States, they continue to
experience both direct and indirect discrimination. Examples of
this is clear when you look at prime contractors and suppliers,
unequal access to capital, bias in bonding decisions, how
contracts are structured, and RFP experience requirements. The
Government has a powerful fundamental interest in addressing
these forms of discrimination.
The DBE program allows minority- and women-owned firms to
participate in federally assisted contracts worth millions of
dollars and, as you have heard earlier, these businesses are
only receiving pennies. But we really do appreciate all the
work that has been going on so far, and I would like to make a
few comments on the disparity studies that have been presented
for a fact of evidence.
While it was clear progress has been made, and many policy
battles have been won, it is also clear there is a continuing
and compelling need for the DBE program. There are far too many
instances when women and minorities are denied equal access to
opportunities in the transportation space. As noted, we
continue to see extreme, compelling statistical evidence of
discrimination, and its effect in disparity studies are really
clear, and we will present other ideas.
For a number of years, this committee has worked in a
bipartisan manner to shore up this program by monitoring
current discrimination and present-day effects on the past
discriminations, as well as legislation modifications for the
current program. These efforts have been really important, and
I want to let Members know that these policy gains have been
great.
But the COVID-19 epidemic has really created even more
problems for our diverse businesses. Although in response to
the pandemic Congress has provided a lot of assistance to small
business, they are hindered by these discrimination policies.
As I said earlier, these businesses have unique challenges that
can't be solved by short-term programs like the Paycheck
Protection Program, and other funding decisions.
ACDBEs will find themselves ill-equipped to participate in
programs like the Main Street Lending Program, and the airport
concessionaires, unlike passenger air carriers, air cargo
carriers, and associated contractors, received no explicit
assistance in phase 3 of the CARES Act. So I would like to ask
you to look at issues surrounding the DBE program, that you
look at what could be done in the short term to protect and
sustain these businesses that are under this current economic
crisis.
I thank you for the opportunity to testify before the House
Committee on Transportation and Infrastructure, and on behalf
of our group and the thousands of airport concessionaires, I
would like to say thank you. And if there are any other
questions, I will be happy to answer those at the appropriate
time.
[Mr. Ali's prepared statement follows:]
Prepared Statement of Farad Ali, Chairman, Government Affairs
Committee, Airport Minority Advisory Council
Chairman DeFazio, Ranking Member Graves, and members of the
Committee, my name is Farad Ali, and I am the Chairman of the
Government Affairs Committee for the Airport Minority Advisory Council
(AMAC). I am also the immediate past Chairman of the Raleigh Durham
International Airport Authority. Thank you for providing AMAC with the
opportunity to participate in the Committee's hearing today.
AMAC was founded thirty-six (36) years ago to combat discrimination
in the airport industry. Since its founding AMAC has been at the
forefront of nearly every national policy discussion concerning the
ubiquitous nature of discrimination in the transportation industry and,
in particular, concerning airport contracting opportunities for small
and disadvantaged businesses enterprises (DBEs). AMAC's members include
DBEs--and airport concessions DBEs (ACDBEs), non-DBEs, airports and
airport officials and others who are committed to promoting diversity
and inclusion in the airport industry. As a result, AMAC occupies a
unique vantage point concerning the purpose of this hearing.
The DBE program authorized by Congress is vitally needed to combat
conscious and unconscious bias and institutional discrimination that
regrettably minority and woman entrepreneurs too often experience. Too
be sure, steady progress has been made; however, our DBE and ACDBE
members regularly attest that without the DBE program they would be
locked out of contracting opportunities. Having served in many
capacities with AMAC (as a board chair and committee chair) and as an
airport commissioner I too have my own direct observations about the
additional work to be done. In addition, anecdotal accounts, academic
papers, and data from recent disparity studies--many of them undertaken
by AMAC members who are consultants and researchers--further document
the continuing challenge of racial and/or gender based barriers to full
participation. They also point to the ongoing need for the DOT DBE
program.
AMAC works consistently with Congress, the US Department of
Transportation, the Federal Aviation Administration, aviation trade
associations, and others as a resource for information, education and
guidance concerning public policies and best practices to redress
discrimination and further diversity and inclusion. On a bi-partisan
basis this Committee and the Congress has shown great leadership in
affirming the government's continuing interest in remedying
discrimination and its effects. As we are aware, Congressional efforts
to monitor ongoing evidence of discrimination undergird the statutory
and regulatory framework of the DBE program--and give airports a
targeted, narrowly tailored, evidence based ``tool'' to promote equity,
fairness, participation. Again, Mr. Chairman, AMAC thanks you and the
Committee for your ongoing leadership and collaborative approach with
industry stakeholders.
Often we are unwilling to have candid discussions about
discrimination and its ongoing present day manifestations. With regard
to the government's interest in combatting discrimination, equity is a
core value of our Constitution and fairness also yields other important
societal benefits. Although there has been growth in the number of
minority businesses in the United States, they continue to experience
both direct and indirect discrimination. Examples of indirect
discrimination include: direct discrimination by prime contractors or
suppliers, unequal access to capital, bias in bonding decisions, how
contracts are structured, RFP experience requirements in RFPs, and the
like. The government has a powerful and fundamental interest in
addressing these forms of discrimination and the DBE program is part of
that effort.
Minority-owned businesses remain underrepresented as a share of the
total U.S. business ownership. Moreover, these businesses when compared
to their non-minority counterparts typically have fewer employees and
lower revenues. This underrepresentation in large measure has its basis
in racial discrimination and addressing it is a critical reason why
Congress must continue to support initiatives like the DBE program.
The program allows women and minority-owned companies to
participate in federally-assisted transportation contracts worth
billions of dollars a year. The program is an essential entry point for
many DBE firms into the transportation space and there is a large and
growing body of evidence that shows that the DBE program enables women
and minority owned firms the opportunity to play in a space that would
otherwise be off limits to them. Simply put, this program works and as
noted previously, it is narrowly tailored to meet the constitutional
standard set out by the U.S. Supreme Court. A fact that has been
affirmed by many federal District and Courts of Appeal.
I'd like to offer a few more comments on disparity studies and
other fact based evidence that discrimination continues to a problem in
the transportation sector. While it's clear that progress has been made
and many policy battles have been won, it is also clear that there is
still a continuing and compelling need for the DBE program. In far too
many instances women and minorities are being denied equal access to
opportunities in the transportation space. As noted previously, we
continue to see extremely compelling statistical evidence of
discrimination and its effects from a variety of disparity studies that
are produced by state and local governments. These studies are backed
up by countless accounts from women and minority owned firms that show
that they continue to operate on an uneven playing field. AMAC
continuously works with its members to monitor ongoing discrimination,
and we will submit some examples to the Committee. AMAC believes that
these accounts show that this problem is not specific to any one
county, state, or group. Rather, it exists throughout the country and
effects countless individual businesses.
In the aggregate, these studies show us that women and minority
owned firms continue to face discrimination and that without
initiatives like the DBE program, these firms would receive far fewer
opportunities to successfully compete for contracts in the
transportation sector. AMAC commends the work that the Committee has
done in this area and I would personally like to thank all of the
Committee Members and their staff for working to ensure that the DBE
program continues to create a fairer marketplace in which women and
minority owned businesses are able to find opportunities in
transportation sector. For a number of years, this Committee has worked
in a bipartisan manner to shore up and maintain this program by:
Monitoring Current Discrimination and the Present Day
Effects of Past Discrimination: Holding hearings like this one permit
the Committee to hear directly from DBEs and ACDBEs and their
representatives about the discrimination they experience as they
attempt to establish and grow their businesses. It is critically
important that Congress and the public have a full understanding of the
types of discrimination that persist across the nation so that they can
support and improve the programs intended to address such
discrimination.. We are grateful to this Committee for the work it has
done in this area.
Legislative Modifications to the Current Program that
Foster a Fairer Marketplace: Similarly, this Committee has also worked
to incorporate needed statutory modifications into legislation that has
moved through this committee. Again, for example, in the 2018 FAA
Reauthorization, the Committee addressed a long-standing discriminatory
small business ``size standard'' barrier to DBEs involved in FAA-
assisted contracting. The legislation rectified this matter by
conforming the DBE size standard for programs authorized by the FAA
bill to those set by the U.S. Small Business Administration. The prior
definition had not used size tests that are generally applicable under
the Small Business Act, but instead imposed an arbitrary rule that
reduced the size standard for DBEs by approximately 30% as compared to
the size standard set in the Small Business Act. We note as well that
H.R. 2, which recently passed the House of Representatives, would
eliminate the discriminatory small business standard with respect to
all DOT modes--highways, transit, and rail.
These efforts have been substantive and helpful in ensuring that
the DBE program continues to be a success. However, while I and AMAC
applaud the Committee for its efforts in assisting women and minority
owned businesses, I want to take some time to let Members know that
many of these policy gains (particularly in airport concessions space)
will likely be lost as a result of the COVID-19 Pandemic--if Congress
does not provide direct and immediate assistance to concessionaires.
The COVID crisis has absolutely decimated women and minority owned
airport businesses. From the vantage point of the airport sector, I can
say that this crisis and the resulting economic downturn has been
absolutely devastating. Airport concessionaires including Disadvantaged
Business Enterprises (ACDBEs) are the third major partner in an
ecosystem that serves air travelers. Concessionaires take empty airport
terminals and turn them into vibrant shopping and dining destinations
that generate important revenues for themselves and fees that are paid
to airports. These concessionaires are major sources of employment and
taxes for surrounding communities and they help to grow the airports in
which they are located by providing (in aggregate and pre-COVID times)
approximately $2.5 billion in non-aeronautical revenue to airports.
This revenue fuels new airport growth by underpinning airport bond
financing, development, and growth.
However, as airport concessionaires, these businesses are uniquely
dependent on the flow of passengers in and around airports. Our
revenues rise and fall based on Airline passenger traffic. If there is
no traffic, we cannot survive. With COVID-19, we have seen this traffic
fall sharply in some cases up to 95% of pre-pandemic totals. This
dramatic fall in potential customer traffic has already caused many
ACDBEs to close their doors permanently. Those that are still open are
barely surviving and have seen their revenues drop by 95 percent or
more. Unlike the rest of the economy, industry experts don't expect
this industry to bounce back quickly. Instead these experts expect
passenger traffic (and subsequently business sales) to remain depressed
for at least 18-36 months. Prior to this pandemic, ACDBE program had
created several success stories of businesses that not only scaled
within their home airport but were able to open new operations in
airports across the country. This program saw businesses that had begun
to setup joint ventures with larger businesses to grow their
operations, and had also seen older ACDBEs act as mentors to other
businesses that had just entered this space. COVID-19 could undo all of
this progress. I don't want to sound alarmist, but the industry and
ACDBEs in particular are at a crossroads.
Although in response to the pandemic Congress has enacted programs
intended to assist small businesses, they are not well suited to the
airport environment. As a result, concessionaires continue to struggle
to secure adequate resources to survive the COVID crisis. ACDBEs, which
are already hindered by discrimination in many aspects of their work,
are even more vulnerable to the pandemic. As I said earlier, these
businesses have unique challenges that can't be solved by short term
programs like the Paycheck Protection Act and often need more funding
than what is currently available under the Economic Injury Disaster
Loan. ACDBEs also find themselves ill-equipped to participate in
programs like the Main Street Lending Program and airport
concessionaires unlike the passenger air carriers, air cargo carriers,
or associated contractors received no explicit assistance in Phase III
of the CARES Act.
Although DBEs and ACDBEs, in particular, are severely impacted by
the pandemic, this economic devastation is not limited to the aviation
sector. Minority businesses in general have been decimated by the
pandemic. All across the country, minority businesses are shutting down
permanently. Lacking pre-existing relationships with banks, many of
these businesses were unable to access loans from the first round of
the PPP. Many of these companies simply folded, taking jobs and
potential revenues with them. This country can't afford to lose a
generation of minority entrepreneurs. These businesses are sources of
income, skills training, and development for many minority communities.
I ask that as you look into the issues surrounding the DBE program that
you also look at what can be done in the short-term to protect and
sustain businesses under the current economic climate. This Committee
and the DBE program has done an amazing job of helping to build a
transportation marketplace that is more equitable and fairer than it
would have been without your efforts. To protect and maintain these
efforts, I ask that Members continue to not only support the DBE
program, but to also work to support the ACDBEs and DBEs as they seek
to get back on their feet.
Thank you for this opportunity to testify before the House
Committee on Transportation and Infrastructure on behalf of AMAC. Our
group and the thousands of Airport Concessionaires that we represent
look forward to working with the Committee to advance policies that
will continue to protect and enhance the DBE program.
Mr. DeFazio. Thank you for your testimony.
Ms. Norman, you may proceed.
Oh, wait, I am sorry, I skipped someone.
Mr. McDonald, you may proceed.
Mr. McDonald. Thank you, Chairman DeFazio, and good
morning, committee members. My name is Sandy McDonald, and I am
the director of the Office of Economic and Small Business
Development in Broward County. I am also here on behalf of
COMTO, the Conference of Minority Transportation Officials,
this morning. And my office is also a member of the Airport
Minority Advisory Council.
It was an excellent start in 1983, when the provision was
made to authorize highway and Federal assistance programs to
allocate at least 10 percent of the funds to be spent with
DBEs. In 1987 the program progressed, and included women during
the reauthorization.
The DBE program, as we know it today, is one of the most
significant tools for guaranteeing the participation of
minority-owned and women-owned businesses in the Federal
procurement of goods and services in the arenas of highway,
aviation, and transit. But we also know we can do more.
In Broward County alone, the DBE program accounts for 408
businesses, of which 210 are women-owned. Throughout the State
of Florida, there are over 4,000 certified DBEs documented. The
significance of the number of DBEs in my county and State is
only one important factor to consider. Equally as important are
the number of jobs these DBEs provide and account for
throughout the State and the country. But yet we know we can do
more.
Broward County believes the success of our DBEs comes from
the additional assistance we are willing to offer in our
program. All DBE program administrators are required to meet
eight objectives of the DBE program under part 26. However, the
following specific objective, ``to assist the development of
firms that can compete successfully in the marketplace outside
the DBE program,'' is one we put extra emphasis on and apply to
grow our minority and women participation and, yes, grow our
overall economy.
The DBE program in Broward County develops and directly
affords our minority- and women-owned businesses the chance to
perfect their craft, realize their growth, build capacity, and
nurture relationships that can carry them far beyond a single
contract. Going through the process for a DBE is invaluable.
Whether they win or lose a specific bid, it allows them to
create relationships that lead to partnerships that have the
potential to result in future contracting opportunities. And it
is that potential with our firms we want to build on even more.
Providing this opportunity through Department of
Transportation contracting for minority- and women-owned
businesses goes far beyond the one single contract. It is
imperative that a DBE program achieves the outlined objectives.
It is these objectives that provide opportunities for DBEs, and
are the standard that DBELOs--Disadvantaged Business Enterprise
Liaison Officers--such as myself, govern our programs by. We
recognize that there is always room for improvement. We accept
the challenges that arise as opportunities to expand on the
original intent, and to continue the purpose of the program.
I have seen the professional growth of DBEs over time. I
have witnessed the evolution of business owners with an idea
who started operations in small residential markets, and then
expanded to commercial markets, and prepared themselves for
Government procurement. I have certified businesses who met all
the eligibility criteria for DBE participation, but were not
familiar with Government bidding or establishing professional
relationships. I have worked with established DBE businesses
who have used their talents and experiences to grow their
business beyond my county, and beyond my State, and to provide
their service in multiple States.
I have also, unfortunately, seen those businesses who were
not given the opportunity this program should allow. We can
actually do more.
The DBE program affords minority- and women-owned
businesses the chance to start, develop, and master their
abilities, and grow beyond their initial footprint and the
program. For this reason and many more, the DBE program needs
to continue for an additional 37 years and beyond.
While my office in Broward County continues to find more
ways to increase our DBE participation while focusing on
successful contracting awards to DBEs, we also pay attention to
the areas where there are opportunities to grow, and embrace
the challenges that could make this program even better. The
success of our program and the impact it has on the local and
State economy is an ideal example of the importance of the DBE
program to drive equality in the field of transportation.
And yes, I will say without question, COVID has impacted
our community in the worst way, and we believe the DBE program
will be one of those starts that helps us to bring our
community back and support the minority- and women-owned
businesses.
Thank you for this opportunity.
[Mr. McDonald's prepared statement follows:]
Prepared Statement of Sandy-Michael E. McDonald, Director, Office of
Economic and Small Business Development, Broward County, Florida
Greetings Chairman DeFazio and Committee Members:
My name is Sandy-Michael E. McDonald and I am the Director of the
Office of Economic and Small Business Development for Broward County,
Florida. I also serve as the Disadvantaged Business Enterprise Liaison
Officer (DBELO) and Airport Concession Disadvantaged Business
Enterprise Liaison Officer (ACDBELO) for the administering of the DBE
and ACDBE programs under 49 CFR Parts 26 & 23. As the DBELO/ACDBELO, it
is my responsibility, and that of my office, to ensure that the
objectives of the Disadvantaged Business Enterprise (DBE) and the
Airport Concessions Disadvantaged Business Enterprise (ACDBE) programs
are adhered to. This includes certifying eligible applicants and
confirming that program activities and projects are monitored and
reported accurately. As this Committee on Transportation and
Infrastructure convenes to hear testimony on the topic of ``Driving
Equality: The U.S. Department of Transportation's Disadvantaged
Business Enterprise Program'', I would like to share some of my
thoughts, professional experiences, and observations of my daily role
in driving equality and using the DBE program to do so.
Opening Statement
It was an excellent start in 1983 when the provision was made to
authorize highway and federal financial assistance programs to allocate
at least 10% of the funds to be spent with DBEs to ensure that
minorities would have an opportunity to participate and compete. In
1987, as the program progressed, it included women during the
reauthorization. The DBE program as we know it today, is one of the
most significant tools for guaranteeing the participation of minority-
owned and women-owned businesses in the federal procurement of goods
and services in the arenas of Highway, Transit and Aviation. However,
it also serves as a foundation for other federal procurement programs
and contracting opportunities.
In Broward County alone, the DBE program accounts for 408
businesses; of which 210 are women-owned. Throughout the State of
Florida there are over 4,043 certified DBEs documented. The
significance of the number of DBEs in my county and state is only one
important factor to consider. Equally as important, are the number of
jobs these DBEs provide and account for throughout the state and
country. The implications and impact on labor and economics of these
combined factors are not singular, but exponential. As an office, we
are excited about growing the number of DBEs in the county, and
throughout the state. We are even more excited about developing DBEs to
participate successfully in the process, and then, preparing them to
win contracts. That is the true value of the program.
Broward County believes the success of our DBEs comes from the
additional assistance we are willing to offer in our program. All DBE
program administrators are required to meet the eight objectives of the
DBE Program under 49 CFR Part 26.1. However, the following specific
objective: ``To assist the development of firms that can compete
successfully in the marketplace outside the DBE program'', is the one
we apply to grow our minority and women participation, and to grow our
overall economy. We support this by preparing minority and women owned
businesses to contract and provide services in all areas of government,
private industry, national and international markets, as well as to
produce more entrepreneurs and startup businesses.
Need of the Program--Then and Now
Broward County clearly understands the importance and the need for
the DBE program since its inception to the present. Through the
projects and procurement of our Aviation and Transit Departments, our
DBEs are given the opportunity to not only participate as a
subcontractor, but to also serve as Prime Contractors (Primes). Due to
our unbundling and small business development, our DBEs can serve as
Primes on contracts and offer additional opportunities to other DBEs as
subcontractors. The DBE program in Broward County develops and directly
affords our minority and women owned businesses the chance to perfect
their craft, realize their growth, build capacity, and nurture
relationships that carry them far beyond a single contract. Going
through the process for our DBEs is invaluable. Whether they win or
lose a specific bid, it still allows them to create relationships that
lead to partnerships that have the potential to result in future
contracting opportunities outside of the government. Providing this
opportunity through DOT contracting for minority and women owned
businesses goes far beyond the contract.
It is imperative that a DBE program achieves the following
objectives:
a) To ensure nondiscrimination in the award and administration of
DOT-assisted contracts in the Department's highway, transit, and
airport financial assistance programs;
b) To create a level playing field on which DBEs can compete
fairly for DOT-assisted contracts;
c) To ensure that the Department's DBE program is narrowly
tailored in accordance with applicable law;
d) To ensure that only firms that fully meet this part's
eligibility standards are permitted to participate as DBEs;
e) To help remove barriers to the participation of DBEs in DOT-
assisted contracts;
f) To promote the use of DBEs in all types of Federally assisted
contracts and procurement activities conducted by recipients.
g) To assist the development of firms that can compete
successfully in the marketplace outside the DBE program; and
h) To provide appropriate flexibility to recipients of Federal
financial assistance in establishing and providing opportunities for
DBEs.
It is these objectives that provide opportunities for DBEs, and are
the standard that DBELOs, such as myself, govern ourselves and the
program. These along with the principles of professionalism and
personal compassion, commitment, interest in growing and sustaining
minority and women owned businesses, and striving for a greater
economy, is why my office and Broward County supports and takes
seriously our role and responsibility.
We recognize that there is always room for improvement. We accept
the challenges that arise as opportunities to expand on the original
intent, and to continue the purpose of the program. Broward County uses
the DBE program and county contracting funded by DOT to stabilize and
grow our economy and workforce. Now, more than ever, due to the COVID-
19 public health crisis, industries such as aviation and transit have
been adversely impacted, and to a degree, completely shut down in some
locations for 5 months or more. Broward is identifying opportunities
through Master Plans and through previously dedicated funding sources,
to continue projects that will put some of our DBEs back to work and
assist in the rejuvenation of our economy. We also realize that for the
DBEs we have certified over the years, a significant part of developing
them is also making sure they have the necessary access to capital.
DBEs must be able to not only win a contract, but also to execute the
contract over time. They must be able to meet all their financial
obligations as they await payment. Clearly, this is a priority for all
small businesses, especially minority and women owned businesses.
Broward County is committed to leveraging resources to assist our
businesses in being prepared financially. Another key element of
developing our DBEs is making sure they have examples of best practices
and access to information sharing. We continue to grow in that area;
this includes building Mentor-Protege relationships, as well as
business development workshops on topics and areas of need and demand.
Closing Remarks
I have seen the professional growth of DBEs over time. I have
witnessed the evolution of business owners with an idea who started
operations in small residential markets and then expanded to commercial
markets and prepared themselves for government procurement. I have
certified businesses who met all the eligibility criteria for DBE
participation but were not familiar with government bidding or
establishing professional relationships. I have worked with established
DBE businesses who have used their talents and experiences to grow
their business beyond my county and beyond my state to provide their
services in multiple states.
The DBE program affords minority and women owned businesses the
chance to start, develop, master their abilities, and grow beyond their
initial footprint and the program. For these reasons, and many more,
the DBE program needs to continue for an additional 37 years and
beyond. While my office and Broward County continues to find more ways
to increase our DBE participation numbers, while focusing on the
successful contracting awards to DBEs, we will also pay attention to
the areas where there are opportunities to grow and embrace the
challenges that could make this great program even better. We will
continue to work to make sure that more than our county office and
staff are aware of the success of the DBE program and its participants.
The participants themselves and their businesses are the best way to
tell the story, and to have a voice for recruitment of new DBEs.
Existing DBEs are the best trainers to share what the best business
practices are. Existing DBEs are the demonstrators of how to contribute
to the economic vitality, success, and a growing economy. Broward
County will continue to do its part to meet and exceed all the
objectives of the 49 CFR to maintain a successful DBE program. The
success of our program and the impact it has on the local and state
economy is an ideal example of the importance of the DBE program to
drive equality in the field of transportation. Broward County
exemplifies what DBEs, in partnership with government, working within a
federal program that is committed to utilizing a target group, can
produce.
Thank you for this opportunity to share my knowledge and experience
with the DBE program. The impact the program has historically had on
the economy, and the effect it continues to have should not be
minimized. I am in full support of the continuation of the program in
the interest of driving equality.
Mr. DeFazio. Thank you, Mr. McDonald. While you are
testifying, if you wonder why I am looking over there, somehow
some people show up on that screen, and some people only show
up over there. So I don't know--I would hope, if our tech
person is listening, when someone is speaking, if we could pop
them up on the main screen, so we can just look forward.
With that, Ms. Norman, you may proceed.
Ms. Norman. Thank you very much, Mr. Chairman and members
of the Transportation and Infrastructure Committee. Thank you
all so much for allowing me to be a part of this process, and I
am very honored and pleased to appear before you today. My name
is Sandra D. Norman. I am division administrator for civil
rights with the Virginia Department of Transportation.
As director, I know firsthand of the DBE program's
importance that is within your jurisdiction. I am very
supportive of the DBE program that assists minority- and women-
owned businesses who are ready, willing, and able to compete
and perform contract work as either a prime contractor or
subcontractor. I believe it is the right thing to do. It
continues to drive equality and inclusiveness.
The DBE program for the United States meets constitutional
tests. Every court has held that the DBE program regulations
and 49 CFR 26 are constitutional.
Why is the DBE program important? Here are some of my
thoughts for you to consider.
The DBE program has its roots in the Civil Rights Act of
1964. It has been regulated through a series of reauthorization
legislative initiatives. The DBE program applies to airport and
surface transportation, highway, transit, and aviation. The DBE
program has been enacted by Congress to address historical
discrimination against minority-owned firms in the
transportation industry, and to ensure that minority- and
women-owned businesses have a fair chance to participate in
contracting opportunities made possible by Federal financial
assistance.
The DBE program, with its rigid certification requirements,
presents an excellent opportunity for a win-win for all
parties.
It is a success for VDOT, and a success for the community.
We want the residents of those communities to benefit from the
public investment in that community. The majority of employment
growth in the United States comes from small businesses. When
small businesses are allowed to do contract work, it is an
opportunity for people who might have been excluded from the
relevant workforce to showcase their talents and skills, get
training, and work within the transportation industry to have
more employment opportunities in the future.
Advancing diversity and making money are not conflicting
goals. It is good for business and good for society.
DOT's DBE program is as relevant today as ever to level the
playing field in transportation for individuals, businesses,
and communities of race, color, and gender. Our country suffers
when talented people who have new ideas and who want to work
hard are denied the opportunity to compete because of their
ethnic background, race, or gender. And that is why there is a
continuing need for the Disadvantaged Business Program, a need
to ensure that small businesses can compete fairly for Federal-
funded, transportation-related projects.
The DBE program, independent of the inherent challenges and
the nature that comes with those challenges, has provided
opportunities for minorities and women-owned small businesses
and other contractors to participate in an arena that has
historically not seen such participation. It has allowed people
to create jobs, and give their employees a quality of life
which they would not have been able to do before the DBE
program.
So, independent of all the challenges, the right part of
the program is access, access to many construction projects
that use governmental money that will have a requirement with a
designated percentage of the total contract values awarded,
making sure they are awarded to the DBEs. This allows access to
DBE businesses that may not have been able to compete on price
with larger operations to win contracts on projects.
In addition to the financial benefit, contacts are made
with respective industries that may lead to additional work. It
is about people.
It is about jobs. And too often we forget that our
industry's golden nuggets are the people who participate in the
DBE program, our small businesses and the thousands upon
thousands of people they employ.
Oftentimes we forget that the faces behind the businesses
also want to leave a legacy for their children, grandchildren,
and for generations yet unborn.
In closing, the success of DOT's DBE program depends on the
rich diversity, skills, and talents of our DBEs. VDOT, as an
agency, will continue to serve as a model DBE program to ensure
that minority- and women-owned businesses have a fair
opportunity to participate in contracting opportunities at
VDOT. Therefore, we are committed to championing and
strengthening our DBE program.
It is the real-life stories of discrimination for minority
and women business owners that are vital to assisting courts,
policymakers such as yourselves, and the public to understand
the need to preserve and improve the Government DBE program
that helps to drive equality and inclusiveness within the U.S.
DOT DBE program.
Again, I am honored, and thank you so much for your time
and consideration.
[Ms. Norman's prepared statement follows:]
Prepared Statement of Sandra D. Norman, Division Administrator, Civil
Rights, Virginia Department of Transportation
Thank you very much, Mr. Chairman, and members of the
Transportation and Infrastructure Committee. Thank you all so much for
allowing me to be a part of this process and I am very honored and
pleased to appear before you today.
My name is Sandra D. Norman, Division Administrator for Civil
Rights for the Virginia Department of Transportation (VDOT). As
Director, I know firsthand of the DBE Program's meaning that is within
your jurisdiction. I am very supportive of the DBE program that assists
minority and women-owned businesses who are ready, willing, and able to
compete and conduct contract work as either a Prime Contractor or
Subcontractor. I believe it is the right thing to do.
The Disadvantaged Business Enterprise (DBE) program for the U.S.
meets constitutional tests. Every court has held that the DBE program
regulations at 49 CFR Part 26 are constitutional.
Why is the DBE Program Important, great question Mr. Chairman? Here
are my thoughts for Transportation and Infrastructure (T&I):
The Disadvantaged Business Enterprise Program (DBE) has its roots
in the Civil Rights Act of 1964. It has been regulated through a series
of reauthorization legislative initiatives. The DBE program applies to
airports and surface transportation (Highway and Transit). The DBE
Program has been enacted by Congress to address historical
discrimination against minority-owned firms in the transportation
industry and to ensure that minority and women-owned businesses have a
fair opportunity to participate in contracting opportunities made
possible by Federal financial assistance
The DBE program, with its rigid certification requirements,
presents an excellent opportunity for a win-win for all parties. It is
a success for VDOT and a success for the community. We want the
residents of those communities to benefit from the public investment in
that community. The majority of employment growth in the United States
comes from small businesses. When small businesses are allowed to do
contract work, it is also an opportunity for people who might have been
excluded from the relevant workforce to showcase their talents and
skills, get trained and work within the transportation industry to have
more employment opportunities in the future. Advancing diversity and
making money are not conflicting goals; it is good for business and
good for society.
Our DBE Program is as relevant today as ever: to level the playing
field in transportation for individuals, businesses, and communities of
race, color, and gender. Our Country suffers when talented people, who
have new ideas, and who want to work hard, are denied the opportunity
to compete because of their ethnic background, race, or gender. And
that is why there is a continued need for the Disadvantaged Business
Program, a need to ensure that small disadvantaged business enterprises
can compete fairly for federal funded transportation related projects.
The DBE program, independent of the inherent challenges and the
nature that comes with those challenges, has provided opportunities for
minorities and women-owned small businesses and other contractors to
participate in an arena that had historically not seen such
participation. It has allowed people to create jobs and give their
employees a quality of life, which they would not have been able to do
before the DBE program. So independent of all the challenges we have,
the right part of the program is ACCESS. Access to many construction
projects that use governmental money that will have a requirement with
a designated percentage of the total contract values awarded are
awarded to DBEs. This allows access to DBE businesses that may not be
able to compete on price with larger operations to win contracts on
projects that such businesses may not traditionally be able to win on
price alone. In addition to the financial benefit, contacts are made
with respective industries that may lead to additional work. It is
about people, it is about jobs, and too often, we forget that our
industry's golden nuggets are the people who participate in the DBE
program and the thousands upon thousands of people they employ.
Oftentimes we forget that the faces behind the businesses also want to
leave a legacy for their children, grandchildren, and for generations
yet unborn.
The success of VDOT's DBE Program depends on the rich diversity,
skills and talents of our DBEs. VDOT will continue to serve as a model
DBE Program to ensure that minority and women-owned businesses have a
fair opportunity to participate in contracting opportunities at VDOT.
Therefore, we are committed to championing and strengthening our DBE
Program. It is the real life stories of discrimination from minority
and women business owners that are vital to assisting courts,
policymakers such as yourselves, and the public to understand the need
to preserve and improve the government disadvantaged business programs
that help to DRIVE EQUALITY.
Again, I am honored, and thank you very much for your time and
consideration.
Mr. DeFazio. Thank you, Ms. Norman.
Dr. Wainwright, you may proceed for 5 minutes.
Mr. Wainwright. Thank you, Chairman DeFazio, Ranking Member
Graves, members of the committee. Good morning. I appreciate
the invitation to appear here today. My name is Jon Wainwright.
I hold a Ph.D. in economics from the University of Texas at
Austin. Until my recent retirement after 24 years, I served as
a managing director at NERA Economic Consulting. My primary
career focus has been analyzing the effects of discrimination
on minorities and women.
My written testimony contains 90 pages of analysis
conducted and compiled for this hearing. I will attempt to
summarize. I have performed extensive original research using
95 existing disparity studies, as well as data covering
millions of firms from the Census Bureau Survey of Business
Owners, the Annual Business Survey, and the American Community
Survey. My testimony is a continuation of similar research I
have performed over the course of my career as an economist.
I conclude that there is strong evidence, both past and
present, of large, adverse, and statistically significant
disparities facing minority-owned and women-owned business
enterprises in the United States. Moreover, these disparities
cannot be explained solely or even primarily by differences in
factors that are untainted by discrimination. In other words,
these disparities are primarily due to discrimination and its
destructive effects.
I reached this conclusion from three main sources of
empirical evidence.
First, disparity studies overwhelmingly demonstrate adverse
findings for minority- and women-owned businesses. The vast
majority of the 95 disparity studies I reviewed in my testimony
identified large, adverse disparities affecting minority- and
women-owned businesses in both construction and professional
services like architecture and engineering. In construction, 72
percent of disparities were adverse, and 81 percent of those
were large and adverse. In construction-related professional
services, 77 percent were adverse and 97 percent of those were
large and adverse. I am confident that, if a similar analysis
were conducted with additional studies such as the 40 that have
been introduced into the record here today, it would reveal
similar results.
Second, census data shows large, adverse, and statistically
significant disparities. The most recent complete census showed
that, for every dollar of sales and receipts earned by
nonminority male-owned firms, African Americans earned just
$.34, Hispanics just $.47, and Asians just $.47. American
Indian and Alaska Native-owned firms earned just $.43. Native
Hawaiian and other Pacific Islander owned firms earned just
$.49, and women earned just $.41.
Third, statistical regression analysis shows that
historical and current disparities are largely due to
discrimination. The most recent American Community Survey shows
that the rate of business formation for African Americans would
be 120 percent higher in the absence of discrimination. For
Hispanics, the figure is 41 percent; for Asians, 30 percent
higher; for American Indians and Alaska Natives, 43 percent
higher; for Native Hawaiians and other Pacific Islanders, 58
percent higher; for women, 44 percent higher, in the absence of
discrimination.
In closing, there is still some good news. As my testimony
shows, and as you have heard today from the other witnesses,
although severe disparities persist, we are making progress,
thanks primarily to public efforts like the DBE and ACDBE
programs. Still, now is not the time to reduce our efforts to
eliminate business discrimination and its effects. Indeed, the
evidence is overwhelming that, if we eliminate or reduce these
programs, much greater disparities will very quickly occur.
The best metaphor I can offer is to consider someone like
myself, who takes blood pressure medication: if you take my
blood pressure while I am on my meds, it will read close to
normal. Obviously, that does not mean that any responsible
doctor will say it is time to stop taking my medicine. This is
precisely why I and other researchers in this area try to
examine both public-sector contracting markets, where
affirmative measures like the DBE program are found, as well as
private-sector contracting markets, where such programs are
rare and, consequently, discrimination remains almost totally
undermediated.
The bottom line is this: despite admirable progress,
discrimination and its destructive effects are deeply rooted in
the American economy. Such discrimination makes it immeasurably
harder for women and minorities to form and grow their own
firms. This reality has innumerable harmful consequences for
our economy and for our Nation. For all these reasons, I
strongly urge you to reauthorize the DBE program. Thank you
very much.
[Mr. Wainwright's 55-page prepared statement follows. The
transcript resumes on page 95.]
Prepared Statement of Jon S. Wainwright, Ph.D., Affiliated Consultant,
NERA Economic Consulting
Chairman DeFazio, Ranking Member Graves, and Members of the
Committee:
Thank you for the invitation to appear here today. My name is Jon
Wainwright. I hold a Ph.D. in economics from the University of Texas at
Austin. Until my recent retirement after 24 years, I served as a
Managing Director at NERA Economic Consulting in Austin, Texas and
Chicago, Illinois. NERA is a national and international economic
consulting firm dedicated to applying economic, finance, and
quantitative principles to complex business and legal challenges. One
of my primary areas of interest as a professional economist has been
documenting and analyzing the effects of discrimination on minorities,
women, and other disadvantaged groups.
I would like to ask the Committee's permission to include my entire
testimony in the record as if read in full and to supplement my
testimony with additional material if needed.
A. Introduction
I have been asked to provide a statistical overview of the
historical and current state of Minority-Owned and Women-Owned Business
Enterprise (M/WBE) in the United States, for the economy as a whole and
particularly in those industry sectors relevant to Federal surface and
aviation transportation funding.
My findings are drawn from evidence in numerous studies of M/WBE
participation in public sector contracting activity that have been
performed in the wake of the U.S. Supreme Court's ruling in City of
Richmond v. J. A. Croson Company,\1\ many of which I conducted myself.
These disparity studies examine statistical evidence of M/WBE
participation in public sector and private sector business activity
compared to M/WBE representation in the relevant business populations,
and offer explanations for the disparities observed between these
factors. They also include qualitative, or anecdotal, accounts from
both M/WBEs and non-M/WBEs regarding these disparities.
---------------------------------------------------------------------------
\1\ 488 U.S. 469 (1989).
---------------------------------------------------------------------------
Additionally, I have drawn findings from the few primary sources of
statistical evidence that exist regarding M/WBEs, namely the Census
Bureau's historical Survey of Business Owners, its new Annual Business
Survey, and its ongoing American Community Survey. The Survey of
Business Owners and its recent successor, the Annual Business Survey,
provide information regarding the total number of M/WBEs in the
country, their gross sales and receipts, and their employment and
payroll, both in absolute terms as well as relative to their
nonminority, male-owned counterparts. The American Community Survey is
an annual version to the old decennial census long form and provides
evidence regarding patterns of business formation by minority and
female entrepreneurs and associated business earnings relative to their
nonminority, male-owned counterparts.
In preparing this testimony, I conducted extensive original
research using all of the above-mentioned sources of evidence. This
research is a continuation of similar research I have performed over
the course of my career as an economist. Based on the findings
presented below, I conclude that there is strong evidence, both past
and present, of large, adverse, and statistically significant
disparities facing minority-owned and women-owned business enterprises
in the United States. Moreover, these disparities cannot be explained
solely, or even primarily, by differences between the relevant
populations in factors untainted by the effects of discrimination.
These disparities are primarily due to discrimination and its effects,
in the economy as a whole, as well as in the markets such as
construction, architecture, and engineering that most relevant to
Federal surface and aviation transportation funding.
1. Qualifications
I hold a Ph.D. in economics from the University of Texas at Austin.
My graduate curriculum included advanced courses in statistics,
econometrics and labor economics, among others. Prior to joining NERA
in 1995, I served as a Research Associate Professor at the Lyndon B.
Johnson School of Public Affairs at the University of Texas at Austin
and also headed my own economic consulting firm. While at NERA, I
conducted economic and statistical studies of discrimination for
attorneys, corporations, governments and non-profit organizations. I
also conducted research and advised clients on adverse impact and
economic damage issues arising from contracting activities, hiring,
termination, performance assessment, compensation, and promotion. I
have extensive experience producing, processing, and analyzing large
and complex statistical data bases, including public sector contracting
and purchasing data, as well as with myriad socioeconomic and
demographic datasets produced by the Census Bureau and other official
statistical agencies.
Over the course of my career, I have conducted economic and
statistical research and assisted in litigation concerning the minority
and female participation in public contracting activities. From 2004
through 2018, I directed NERA's national discrimination consulting
practice. In that capacity, I served as the project director and
principal investigator for more than 40 studies of business
discrimination, and prior to that time as principal or co-principal
investigator on approximately a dozen additional business
discrimination studies. I have authored two peer-reviewed monographs
and several articles and white papers on this and related subjects,
including Guidelines for Conducting a Disparity and Availability Study
for the Federal DBE Program, published in 2010 by the Transportation
Research Board of the National Academy of Sciences.
Between 2010 and 2013 I served as the principal economic and
statistical expert on behalf of the U.S. Department of Justice,
testifying in four cases challenging Federal policies to promote
participation by minority-owned and/or women-owned businesses in
Federal contracting activities. These were:
Kevcon, Inc. v. The United States (United States Court of
Federal Claims), concerning the Small Business Administration's 8(a)
minority business set-aside program.\2\
---------------------------------------------------------------------------
\2\ Wainwright, Jon S. (2010).
---------------------------------------------------------------------------
Geyer Signal, Inc. and Kevin Kissell v. Minnesota
Department of Transportation, et al. (United States District Court for
the District of Minnesota), concerning the USDOT Disadvantaged Business
Enterprise Program.\3\
---------------------------------------------------------------------------
\3\ Wainwright, Jon S. (2012).
---------------------------------------------------------------------------
Midwest Fence Corporation v. United States Department of
Transportation, et al. (United States District Court for the Northern
District of Illinois, Eastern Division), concerning the USDOT
Disadvantaged Business Enterprise Program.\4\
---------------------------------------------------------------------------
\4\ Wainwright, Jon S. (2013b), (2013c).
---------------------------------------------------------------------------
Rothe Development, Inc. v. Department of Defense and
Small Business Administration (United States District Court for the
District of Columbia), concerning the Small Business Administration
8(a) minority business set-aside program.\5\
---------------------------------------------------------------------------
\5\ Wainwright, Jon S. (2013a).
I have been repeatedly qualified as an expert economic and
statistical witness in both Federal and state courts and have testified
in these and related matters on 20 occasions. I have also testified
before the U.S. Congress on these matters on five previous occasions.
My current curriculum vitae is attached to this testimony. The
source material relied on in reaching my findings and conclusions are
noted below in the body of my testimony.
2. Discrimination and its Effects, Historically and Currently,
Consistently Disadvantages Minority- and Women-Owned Business
Enterprises
As other researchers have noted, and as demonstrated in many of the
studies, reports, and other testimony submitted to Congress, minorities
and women have been historically and consistently disadvantaged by the
effects of discrimination in business enterprise.\6\ Despite progress
in some areas, these disadvantages are still present in business
markets.\7\ As my testimony demonstrates, although severe disparities
persist between non-minority male owned firms and minority- and women-
owned firms, we are making progress thanks to programs like the
Disadvantaged Business Enterprise Program. Still, now is no time to
reduce our efforts to eliminate business discrimination and its
effects. Indeed, much of the progress that has been achieved is due to
the effect that programs like the DBE program have had. The evidence is
overwhelming that, were we to eliminate or reduce these programs, much
greater disparities would very quickly occur. The best metaphor I can
think of is the person who takes blood pressure medicine. If we take
that person's blood pressure while they are taking their medicine,
their blood pressure will appear normal but that does not mean that any
responsible doctor would argue that the person should stop taking their
blood pressure medicine. This is precisely why I and other researchers
in this area try to examine both the public sector contracting markets
where affirmative measures like the DBE program are found as well as
the private sector contracting markets where such programs are much
more rare. This is also why, although my testimony includes voluminous
data from public sector sources like disparity studies, I also include
a great deal of information from Census sources which examine markets
that are largely unremediated by programs like the DBE program.
---------------------------------------------------------------------------
\6\ See, e.g., U.S. Department of Commerce (2015); Lowrey (2010a);
Lowrey (2010b); Marshall (2002); Wainwright (2000).
\7\ See, generally, U.S. Small Business Administration (2010).
---------------------------------------------------------------------------
African Americans are 13.3 percent of the general population, 12.6
percent of the civilian labor force, and 12.2 percent of total
employment. However, at last count, African Americans owned only 9.5
percent of the nation's businesses, and earned a mere 1.26 percent of
all business sales and receipts.\8\
---------------------------------------------------------------------------
\8\ General population statistics are from the U.S. Census Bureau
(2017a); civilian labor force and total employment figures are from the
Bureau of Labor Statistics (2018a, 2018b, 2018c); business enterprise
statistics are from the 2012 Survey of Business Owners, U.S. Census
Bureau (2018b). Note: Publicly owned companies have been excluded from
all calculations in this report that use Survey of Business Owners or
Annual Business Survey statistics.
---------------------------------------------------------------------------
Hispanics are 18.2 percent of the general population, 17.1 percent
of the civilian labor force, and 17.0 percent of total employment.
However, at last count Hispanics owned only 12.2 percent of the
nation's businesses, earned less than 4.0 percent of all business sales
and receipts.
American Indians and Alaska Natives are 1.3 percent of the general
population, but they are only 1.0 percent of the business population
and earned just 0.32 percent of business sales and receipts.
Asians and Pacific Islanders represent 6.1 percent of the general
population, 6.2 percent of the civilian labor force, and 6.2 percent of
total employment. While Asians own 7.1 percent of the nation's
businesses, they earned only 5.9 percent of business sales and
receipts.
Women represent 50.9 percent of the general population, 46.9
percent of the civilian labor force, and 46.9 percent of total
employment. However, they are only 36.4 percent of the business
population and earn only 11.9 percent of business sales and receipts.
Even those minorities and women who manage against the odds to
start their own businesses must compete in a business enterprise system
that has long been dominated by non-minority male-owned firms.\9\ The
advantages enjoyed by non-minority males in this context are borne out
in the statistics. In a groundbreaking pair of studies of employer
business closure rates, Professor Ying Lowrey documented that existing
African American-owned, Hispanic-owned, Asian and Pacific Islander-
owned, and women-owned businesses across a wide variety of industry
groups suffered substantially higher closure rates during the 2002-2006
period than did their nonminority male counterparts.\10\ More recently,
Professor Rob Fairlie has shown that African American, Hispanic Asian,
American Indian and Alaska Native, and female small businesses closed
at higher rates than their non-minority male counterparts during the
first month of widespread COVID-19 induced shelter-in-place
restrictions in April of this year.\11\
---------------------------------------------------------------------------
\9\ See, e.g., Wainwright (2000), pp. 17-22, and the studies cited
therein.
\10\ Lowrey, Ying (2010a), pp. 20-21; Lowrey, Ying (2010b), p. 16.
The comparison was between non-publicly held establishments that were
in business in 2002 but had closed by 2006 versus all non-publicly held
establishments in business in 2002.
\11\ Fairlie, Robert (2020). p. 16.
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Even among larger firms, such as those with one or more paid
employees, the disparities between minorities and women, on the one
hand, and non-minority males, on the other, are stark. In 2017, for
every dollar in sales and receipts earned by non-minority male-owned
employers, African American-owned employers earned 45 cents, Hispanic-
owned employers earned 57 cents, Asian and Pacific Islander-owned
employers earned 63 cents, American Indians and Alaska Native-owned
employers earned 67 cents, and women-owned employers earned 61
cents.\12\
---------------------------------------------------------------------------
\12\ U.S. Census Bureau (2020a). For employer firms, the most
recent data are from the 2017 Annual Business Survey, released in May
2020.
---------------------------------------------------------------------------
The overwhelming majority of businesses have less than 10
employees, and only a small fraction have more than 500 employees.
Minority- and women-owned firms are over-represented in the former
category and under-represented in the latter. For the smallest firms in
2017 (the most recent data available), 78 percent of non-minority male-
owned firms had less than 10 employees, compared to 82.1 percent of
African American-owned firms, 82.3 percent of Hispanic-owned firms,
81.2 percent of Asian and Pacific Islander-owned firms, 82.2 percent of
American Indian and Alaska Native-owned firms, and 82.2 percent of
women-owned firms.\13\ For the largest firms in 2017, 0.21 percent of
nonminority-owned male firms had 500 or more employees, compared to
0.12 percent of African Americans, 0.1 percent of Hispanics, 0.07
percent of Asians and Pacific Islanders, 0.11 percent of Native
Americans, and 0.1 percent of women.\14\
---------------------------------------------------------------------------
\13\ U.S. Census Bureau (2018b, 2018c 2018d).
\14\ Ibid.
---------------------------------------------------------------------------
B. Studies Conducted Since 2000 Provide Strong Evidence of Disparities
Against Minority- and Women-Owned Businesses
As mentioned above, between 2010 and 2013 I served as an expert
witness on behalf of the U.S. Department of Justice in its defense of
two challenges to the SBA 8(a) Program and two challenges to the USDOT
DBE Program. As part of this work, I collected and reviewed every known
study of M/WBE disparities published since 2000.
1. Data and Methods
Table 1 identifies 95 studies of minority and female business
enterprise completed between 2000 and 2012. These studies examined M/
WBE participation in public contracting and procurement for 127
different public entities and/or funding sources. The studies span 32
different states that collectively account for over 80 percent of the
general population of the United States.\15\ Of the 95 studies, 21 were
conducted under my direction. Over the course of these studies, I
personally examined and analyzed tens of billions of dollars worth of
public sector spending across tens of thousands of contracts and
subcontracts. The remaining 74 studies covered an even larger number of
public contracts and public dollars.
---------------------------------------------------------------------------
\15\ U.S. Census Bureau (2011e).
---------------------------------------------------------------------------
All of the disparity studies in Table 1 examined minority-owned
business enterprises as well as non-minority women-owned business
enterprises. Typically, M/WBEs include businesses owned by African
Americans, Hispanics, Asians and Pacific Islanders, American Indians
and Alaska Natives, and non-minority women.
A wide variety of government types are represented as well in these
disparity studies. Some studies encompassed the entire state (i.e.,
Indiana, Maryland, Minnesota, New York, Texas, and Virginia), others
were performed for single state agencies (i.e., Department of
Transportation studies in Alaska, Arizona, California, Colorado,
Georgia, Hawaii, Idaho, Illinois, Kansas, Maryland, Minnesota,
Missouri, Montana, Nevada, North Carolina, Oklahoma, Oregon, Virginia,
and Washington and the Division of Capital Asset Management and the
Housing Finance Agency in Massachusetts), others were done for cities
(i.e., Atlanta, Augusta, Austin, Baltimore, Boston, Charlotte,
Cincinnati, Columbia, Dayton, Denver, Durham, Fort Worth, Houston,
Kansas City, Memphis, Milwaukee, Minneapolis, Nashville, Philadelphia,
Phoenix, Portland, San Antonio, St. Louis, St. Paul, Tallahassee,
Tucson, and Tulsa), others covered counties (i.e., Pima, AZ; Broward,
FL; Leon, FL; Richmond, GA; Wyandotte, KS; Durham, NC; Davidson, TN),
and still more were for a variety of special districts including
schools, public utilities, housing authorities, airports, and transit
agencies.
All 95 studies identified included contracts and procurements for
public works in construction, and a large majority also included
contracts in the construction-related professional services (``CRS'')
sector, which includes architecture, engineering, and related services.
Construction and CRS activities include the public works performed by
highway departments, transit agencies, and airports under USDOT
jurisdiction.\16\
---------------------------------------------------------------------------
\16\ Construction prime contractors and subcontractors also
purchase a variety of supplies and materials (e.g., steel, concrete,
asphalt), as well as trucking services.
---------------------------------------------------------------------------
Many of the disparity studies in Table 1 encompass public
contracting and purchasing activities in other industry sectors as
well. This reflects the fact that state and local governments, and
their prime contractors and vendors, purchase goods and services from
practically every major industry. In addition to construction and CRS,
these include agriculture, mining, utilities, transportation, wholesale
trade, retail trade, finance and insurance, real estate, professional
and technical services, administrative and support services, waste
management services, educational services, health care and social
assistance services, food services, and others. NERA's most recent
study for the State of Maryland, for example, encompassed 695 distinct
industries.\17\
---------------------------------------------------------------------------
\17\ NERA Economic Consulting (2017), p. 45. However, public sector
spending is not typically distributed evenly among industries. In the
State of Maryland's case, 261 industries (38 percent) accounted for 99
percent of all spending over the study period.
---------------------------------------------------------------------------
In addition to covering construction, CRS, and other industries,
the 95 studies in Table 1 span the country geographically, representing
all four Census Regions and all nine Census Divisions. In all, 32
states plus the District of Columbia are represented here, as well as
53 of this Committee's 67 members.
As part of my work on behalf of USDOJ, I reviewed all of 95 studies
identified in Table 1. Typically, these studies include an Executive
Summary, a review of case law pertaining to M/WBEs, a review of the
government's purchasing and contracting policies as they pertain to M/
WBEs, a chapter estimating the availability of M/WBEs, a chapter
estimating the utilization of M/WBEs, a chapter comparing availability
and utilization to assess disparities, and a chapter examining
anecdotal evidence of discrimination. Often, these disparity studies
also included one or more chapters examining evidence of disparities
and discrimination in the wider market area, surrounding a particular
government's jurisdiction. These are referred to as ``private sector''
or ``economy-wide'' analyses.
2. Findings
Each study is different. They were prepared by different
consultants, for different governments, in different parts of the
country, with differing levels of resources. They examined different
periods of time and used a variety of methods for assessing
utilization, availability, and disparity, and for gathering anecdotal
information.\18\
---------------------------------------------------------------------------
\18\ A detailed discussion of the differences in methods employed
by different consultants is provided in Wainwright and Holt (2010), pp.
29-53.
---------------------------------------------------------------------------
Nevertheless, the striking similarities among these studies
strongly outweigh the differences. Foremost among these is an almost
universal finding that historical and contemporary discrimination
adversely impacts all different types of M/WBEs throughout the United
States, in the construction sector, the CRS sector, and in other
industry segments as well.
To begin to see this, Table 2 presents specific statistical
findings from the studies listed in Table 1. One primary function of a
disparity study is to gather information on a government entity's prime
contracting and subcontracting activity during the time period being
studied. Since the Federal DBE Program applies to both prime
contracting and subcontracting, I focused my review on the combined
utilization of M/WBEs as both prime contractors and subcontractors.\19\
---------------------------------------------------------------------------
\19\ Depending on how any given study's statistics were presented,
I had to carry out certain additional calculations in order to present
the information in Table 2 in a consistent manner. For example, a study
might show the total number of prime contract construction dollars
accruing to M/WBEs in one table, the total number of subcontract
construction dollars accruing to M/WBEs in another table, and the total
number of construction dollars overall in yet another table.
Calculating overall M/WBE prime contract and subcontract utilization
thereby required adding the figure in the first table to the figure in
the second table and dividing the sum by the figure in the third table.
These figures, in turn, might then be combined with availability
statistics from one or more tables in the study in question to form the
relevant disparity index.
---------------------------------------------------------------------------
I reviewed each study's findings concerning:
The percentage utilization of M/WBEs in construction
spending,
The percentage availability of M/WBEs for construction
spending,
The percentage utilization of M/WBEs in CRS spending, and
The percentage availability of M/BEs for CRS spending.
Several appear more than once in Table 2 since they provided
statistical evidence in more than one relevant category. Columns (1)
and (2) in Table 2 identify the state and political subdivision for
which each disparity study was performed. Columns (3) and (6) present
the utilization statistics for construction and CRS, respectively.
Columns (4) and (7) present the availability statistics for
construction and CRS, respectively. Columns (5) and (8) present the
disparity indexes for construction and CRS, respectively. Column (9)
indicates the years covered by each study. Column (10) provides the
page citations for the statistical data presented.
The disparity indexes presented in column (5) for construction and
column (8) for CRS are formed by dividing the M/WBE utilization
percentage by the M/WBE availability percentage, and multiplying the
result by 100. A disparity index of 100 or more indicates that M/WBEs
are being utilized at or above their market availability level. A
disparity index of less than 100 indicates that M/WBEs are being
utilized at or below their market availability level. A disparity index
of 80 or lower is commonly taken as an indicator that discrimination is
adversely affecting M/WBEs.\20\
---------------------------------------------------------------------------
\20\ Although not the same as statistical significance, the ``four-
fifths rule'' says that a disparity index of less than or equal to 80
(on a scale of zero to 100, zero being perfect disparity and 100 being
perfect parity), because it is large, or ``substantively'' significant,
indicates the presence of discrimination. See 29 C.F.R. Sec. 1607.4(d).
---------------------------------------------------------------------------
The substantial majority of the disparity studies reviewed and
presented in Table 2 identified large adverse disparities affecting M/
WBEs in both construction and CRS.\21\ There are 206 disparity indexes
altogether--127 for the construction sector and 79 for the CRS sector.
---------------------------------------------------------------------------
\21\ In Table 2, disparity indexes of 80 or lower are highlighted
in boldface type. Disparity indexes above 80 but still less than 100
(which would indicate parity with non-M/WBEs) are highlighted in
boldface italicized type.
---------------------------------------------------------------------------
In construction, 74 of 127 disparity indexes, or 58
percent, fall at or below 80; and 91 of 127, or 72 percent, are less
than 100.
In CRS, 59 of 79 disparity indexes, or 75 percent, fall
at or below 80; and 61 of 79, or 77 percent, are less than 100.
Combining the results from both industry sectors, 133 of
206 disparity indexes, or 65 percent, fall at or below 80; and 152 of
206, or 74 percent, are less than 100.
Notably, the general consistency of these results occurs despite
these studies having been undertaken by different consultants, using
differing methods, at different points in time, with different budgets,
and for a wide variety of state and local government agencies in a wide
variety of geographic locations. Perhaps most notably, these
disparities exist despite the fact that, in the overwhelming majority
of studies there was a strong, mature MBE or DBE program in place aimed
at eliminating disparities. In other words, these disparities are so
powerful and so severe that even strong efforts to level the playing
field are simply not enough to eradicate them.
Eleven different consultants produced the studies in Table 2.
However, just four firms produced 75 percent of these studies: MGT of
America, NERA Economic Consulting, BBC Research & Consulting, and Mason
Tillman Associates.
Of the 34 construction disparity indexes from MGT of
America, 20 (59 percent) are less than or equal to 80 and 26 (76
percent) are less than or equal to 100. Of the 15 CRS disparity indexes
from MGT, 12 (80 percent) are less than or equal to 80 and 12 (80
percent) are less than or equal to 100.
Of the 24 construction disparity indexes from NERA
Economic Consulting, 16 (67 percent) are less than or equal to 80 and
17 (71 percent) are less than or equal to 100. Of the 20 CRS disparity
indexes from NERA, 10 (50 percent) are less than or equal to 80 and 11
(55 percent) are less than or equal to 100.
Of the 23 construction disparity indexes from BBC
Research & Consulting, 13 (57 percent) are less than or equal to 80 and
17 (74 percent) are less than or equal to 100. Of the 20 CRS disparity
indexes from BBC, 17 (85 percent) are less than or equal to 80 and 17
(85 percent) are less than or equal to 100.
Of the 17 construction disparity indexes from Mason
Tillman Associates, 13 (76 percent) are less than or equal to 80 and 16
(94 percent) are less than or equal to 100. Of the 12 CRS disparity
indexes from Mason Tillman, 10 (83 percent) are less than or equal to
80 and 10 (83 percent) are less than or equal to 100.
Of the 29 construction disparity indexes from the balance
of consulting firms in Table 2, 12 (41 percent) are less than or equal
to 80 and 15 (52 percent) are less than or equal to 100. Of the 12 CRS
disparity indexes from the balance of consulting firms, 10 (83 percent)
are less than or equal to 80 and 11 (92 percent) are less than or equal
to 100.
Some specific results in Table 2 are highlighted below:
Of the 33 state DOT construction disparity indexes, 26
(79 percent) are less than or equal to 80 and 29 (88 percent) are less
than or equal to 100. These include Alaska, Arizona, California,
Colorado, Georgia, Hawaii, Idaho, Illinois, Kansas, Minnesota,
Missouri, Nevada, North Carolina, Oregon, Texas, Virginia, and
Washington.
Of the 24 state DOT CRS disparity indexes, 23 (96
percent) are less than or equal to 80 and 23 (96 percent) are less than
or equal to 100. These include Arizona, California, Colorado, Georgia,
Idaho, Illinois, Missouri, Montana, Nevada, North Carolina, Oklahoma,
Oregon, Virginia, and Washington. Only Hawaii was found to have
consistently utilized M/WBEs at or above their estimated availability
in CRS.
Of the 11 statewide (excluding DOTs) construction
disparity indexes, 7 (64 percent) are less than or equal to 80 and 10
(91 percent) are less than or equal to 100. Of the 4 statewide
(excluding DOTs) CRS disparity indexes, 3 (75 percent) are less than or
equal to 80 and 4 (100 percent) are less than or equal to 100.
Of the 41 city or county construction disparity indexes,
19 (46 percent) are less than or equal to 80 and 25 (61 percent) are
less than or equal to 100. Of the 22 city or county CRS disparity
indexes, 13 (59 percent) are less than or equal to 80 and 13 (59
percent) are less than or equal to 100.
Of the 39 special district (e.g., transit agencies,
airports, housing authorities, school districts) construction disparity
indexes, 23 (59 percent) are less than or equal to 80 and 27 (69
percent) are less than or equal to 100. Of the 28 special district CRS
disparity indexes, 20 (71 percent) are less than or equal to 80 and 21
(75 percent) are less than or equal to 100.
Finally, in almost all of the studies presented, the statistical
findings are accompanied by anecdotal evidence of discrimination
against M/WBEs.\22\ Many of these studies also include statistical
evidence of disparities in the surrounding private sector--in minority
and female business formation rates, business owner earnings, and
access to commercial loans and capital. This type of statistical
evidence is especially important since it helps explain why the large
and adverse disparities observed for M/WBEs can be attributed to
discrimination rather than to other, non-discriminatory factors.
---------------------------------------------------------------------------
\22\ See also, e.g., U.S. Small Business Administration (2010),
Aparicio (2009), Asian American Justice Center (2008), Lau (2009), Quon
(2008), U.S. Congress (2007), (2008), (2009a), (2009b), and (2009c).
---------------------------------------------------------------------------
3. Conclusions from the Disparity Study Data
According to my records, there are at least another 150 disparity
studies that have been completed since I finished my work for USDOJ in
2013. There is no doubt in my mind that were I to conduct a comparable
analysis on these latest studies, I would find similar results--large
and adverse disparities that continue to face M/WBEs throughout the
country. In the next two sections of my testimony, I examine the most
recent Census Bureau data with respect to M/WBEs.
Table 1. Selected Disparity and Availability Studies Performed in the United States Between 2000-2012
----------------------------------------------------------------------------------------------------------------
Year
State Subdivision Author Type of Study Completed
----------------------------------------------------------------------------------------------------------------
AK................................ Department of D. Wilson Consulting Disparity........... 2007
Transportation and Group, LLC.
Public Facilities.
AZ................................ Arizona Department of MGT of America, Inc. Disparity........... 2009
Transportation.
AZ................................ City of Phoenix...... MGT of America, Inc. Disparity........... 2005
AZ................................ City of Tucson....... D. Wilson Consulting Disparity........... 2008
Group, LLC.
AZ................................ Pima County.......... D. Wilson Consulting Disparity........... 2008
Group, LLC.
CA................................ Bay Area Rapid Mason Tillman Disparity........... 2009
Transit (BART). Associates, Ltd..
CA................................ California Department BBC Research & Disparity........... 2007
of Transportation. Consulting.
CA................................ Los Angeles County BBC Research & Disparity........... 2010
Metropolitan Consulting.
Transportation
Authority.
CA................................ Metrolink--Southern BBC Research & Disparity........... 2009
California Regional Consulting.
Rail Authority.
CA................................ Orange County BBC Research & Disparity........... 2010
Transportation Consulting.
Authority.
CA................................ San Diego Association BBC Research & Disparity........... 2010
of Governments. Consulting.
CA................................ San Diego BBC Research & Disparity........... 2010
Metropolitan Transit Consulting.
System.
CA................................ San Mateo County CRA International... Disparity........... 2008
Transit District.
CA................................ Santa Clara Valley CRA International... Disparity........... 2007
Transportation
Authority.
CO................................ City and County of NERA................ Disparity........... 2006
Denver, Denver
International
Airport.
CO................................ Colorado Department MGT of America, Inc. Disparity........... 2001
of Transportation.
CO................................ Colorado Department D. Wilson Consulting Disparity........... 2009
of Transportation. Group, LLC.
CT................................ Metropolitan District M3C................. Disparity........... 2009
Commission.
DC................................ Washington Suburban Mason Tillman Disparity........... 2011
Sanitary Commission. Associates, Ltd..
FL................................ Broward County....... MGT of America, Inc. Disparity........... 2001
FL................................ Broward County....... NERA................ Disparity........... 2010
FL................................ City of Tallahassee.. MGT of America, Inc. Disparity........... 2004
FL................................ Leon County.......... MGT of America, Inc. Disparity........... 2009
FL................................ School District of Mason Tillman Disparity........... 2007
Hillsborough County. Associates, Ltd..
GA................................ City of Atlanta...... Griffin & Strong.... Disparity........... 2006
GA................................ Consolidated NERA................ Disparity........... 2009
Government of
Augusta-Richmond
County.
GA................................ Georgia Department of Boston Research Disparity........... 2005
Transportation. Group, Inc..
GA................................ Georgia Department of BBC Research & Disparity........... 2012
Transportation. Consulting.
HI................................ Hawai'i Department of NERA................ Disparity........... 2010
Transportation.
ID................................ Idaho Transportation BBC Research & Disparity........... 2007
Department. Consulting.
IL................................ Illinois Department Mason Tillman Disparity........... 2011
of Transportation. Associates, Ltd..
IL................................ Illinois State Toll Mason Tillman Disparity........... 2011
Highway Authority. Associates, Ltd..
IL................................ Illinois State Toll NERA................ Disparity........... 2006
Highway Authority.
IN................................ Indiana Department of BBC Research & Disparity........... 2010
Administration, Consulting.
Indiana DOT, Ball
State Univ., Indiana
State Univ., Indiana
Univ., Ivy Tech
Comm. College,
Purdue Univ., Univ.
of Southern Indiana,
Vincennes Univ..
KS................................ Kansas Department of MGT of America, Inc. Availability........ 2003
Transportation.
KS;............................... City of Kansas City; Mason Tillman Disparity........... 2006
MO Wyandotte County, Associates, Ltd..
KS; Kansas City Area
Transit Authority;
Kansas City School
District, MO.
MD................................ City of Baltimore.... MGT of America, Inc. Disparity........... 2000
MD................................ City of Baltimore.... NERA................ Disparity........... 2007
MD................................ State of Maryland.... NERA................ Disparity........... 2006
MD................................ State of Maryland.... NERA................ Disparity........... 2011
MA................................ City of Boston....... Mason Tillman Disparity........... 2003
Associates, Ltd..
MA................................ Division of Capital NERA................ Disparity........... 2006
Asset Management.
MA................................ Massachusetts Housing NERA................ Disparity........... 2006
Finance Agency.
MN................................ City of Minneapolis.. NERA................ Disparity........... 2010
MN................................ City of St. Paul and MGT of America, Inc. Disparity........... 2008
the St. Paul Housing
Authority.
MN................................ Metropolitan Airports MGT of America, Inc. Disparity........... 2009
Commission.
MN................................ Metropolitan Council. MGT of America, Inc. Disparity........... 2009
MN................................ Minnesota Department MGT of America, Inc. Disparity........... 2009
of Administration.
MN................................ Minnesota Department NERA................ Availability........ 2005
of Transportation.
MN................................ Minnesota Department MGT of America, Inc. Disparity........... 2009
of Transportation.
MO................................ Bi-State Development NERA................ Disparity........... 2005
Agency (St. Louis
Metro).
MO................................ City of St. Louis, MGT of America, Inc. Disparity........... 2001
The St. Louis
Housing Authority,
The Metropolitan St.
Louis Sewer District.
MO................................ Missouri Department NERA................ Disparity........... 2012
of Transportation.
MT................................ Montana Department of D. Wilson Consulting Disparity........... 2009
Transportation. Group, LLC.
NV................................ Nevada Department of BBC Research & Disparity........... 2007
Transportation. Consulting.
NY................................ State of New York.... NERA................ Disparity........... 2010
NC................................ City of Charlotte.... MGT of America, Inc. Disparity........... 2011
NC................................ City of Durham and Mason Tillman Disparity........... 2000
Durham County. Associates, Ltd..
NC................................ Durham County........ Griffin & Strong.... Disparity........... 2007
NC................................ North Carolina MGT of America, Inc. Disparity........... 2004
Department of
Transportation.
NC................................ North Carolina Euquant............. Disparity........... 2009
Department of
Transportation.
OH................................ City of Cincinnati... Griffin & Strong.... Disparity........... 2002
OH................................ City of Dayton....... MGT of America, Inc. Disparity........... 2008
OH................................ Northeast Ohio NERA................ Disparity........... 2010
Regional Sewer
District.
OK................................ City of Tulsa........ MGT of America, Inc. Disparity........... 2010
OK................................ Oklahoma Department BBC Research & Disparity........... 2010
of Transportation. Consulting.
OR................................ City of Portland..... BBC Research & Disparity........... 2011
Consulting.
OR................................ Oregon Department of MGT of America, Inc. Disparity........... 2007
Transportation.
OR................................ Port of Portland..... MGT of America, Inc. Disparity........... 2009
OR................................ Portland Development BBC Research & Disparity........... 2011
Commission. Consulting.
PA................................ City of Philadelphia. Econsult Corporation Disparity........... 2007
PA................................ City of Philadelphia. Econsult Corporation Disparity........... 2008
PA................................ City of Philadelphia. Econsult Corporation Disparity........... 2009
PA................................ City of Philadelphia. Econsult Corporation Disparity........... 2010
PA................................ City of Philadelphia. Econsult Corporation Disparity........... 2011
PA................................ City of Philadelphia. Econsult Corporation Disparity........... 2012
SC................................ City of Columbia..... MGT of America, Inc. Disparity........... 2006
TN................................ City of Memphis...... Griffin & Strong.... Disparity........... 2010
TN................................ Consolidated Griffin & Strong.... Disparity........... 2004
Government of
Nashville and
Davidson County.
TN................................ Memphis International NERA................ Disparity........... 2008
Airport.
TN................................ Nashville Griffin & Strong.... Disparity........... 2007
International
Airport.
TX................................ City of Austin....... NERA................ Disparity........... 2008
TX................................ City of Fort Worth; Mason Tillman Disparity........... 2010
City of Arlington; Associates, Ltd..
DFW Airport; Fort
Worth Independent
School District;
Fort Worth
Transportation
Authority; North
Texas Tollway
Authority [North
Central Texas
Council of
Governments].
TX................................ City of Houston...... NERA................ Disparity........... 2012
TX................................ City of San Antonio, MGT of America, Inc. Disparity........... 2009
Alamo Regional
Mobility Authority,
Brooks Development
Authority, CPS
Energy, Edwards
Aquifer Authority,
Port Authority of
San Antonio, San
Antonio Housing
Authority, San
Antonio Water
System, University
Health System.
TX................................ Dallas Area Rapid Mason Tillman Disparity........... 2003
Transit Authority Associates, Ltd..
(DART).
TX................................ State of Texas....... Mason Tillman Disparity........... 2007
Associates, Ltd..
TX................................ State of Texas....... MGT of America, Inc. Disparity........... 2010
UT................................ Salt Lake City NERA................ Disparity........... 2009
International
Airport.
VA................................ Commonwealth of MGT of America, Inc. Disparity........... 2004
Virginia.
VA................................ Commonwealth of MGT of America, Inc. Disparity........... 2010
Virginia.
VA................................ Virginia DOT......... MGT of America, Inc. Disparity........... 2004
WA................................ Washington Department NERA................ Availability........ 2005
of Transportation.
WI................................ City of Milwaukee.... Mason Tillman Disparity........... 2007
Associates, Ltd..
WI................................ City of Milwaukee.... D. Wilson Consulting Disparity........... 2010
Group, LLC.
----------------------------------------------------------------------------------------------------------------
Table 2. M/WBE Utilization, Availability, and Disparity: Selected Studies Performed in the U.S. Between 2000-2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
State Subdivision U-CON A-CON D-CON U-CRS A-CRS D-CRS Years Page
----------------------------------------------------------------------------------------------------------------------------------------------- Spec.
---------
(1) (2) (3) (4) (5) (6) (7) (8) (9) (11)
--------------------------------------------------------------------------------------------------------------------------------------------------------
AK........................................... Department of Transportation and 10.52 14.26 73.73 2002- 4-9,
Public Facilities. 2006 4-11,
5-10,
5-13
--------------------------------------------------------------------------------------------------------------------------------------------------------
AZ........................................... Arizona Department of 7.03 15.61 45.03 5.39 27.07 19.90 2002- 4-47
Transportation. 2007
--------------------------------------------------------------------------------------------------------------------------------------------------------
AZ........................................... City of Phoenix................. 11.37 21.48 52.94 2000- 4-29,
2004 4-33
--------------------------------------------------------------------------------------------------------------------------------------------------------
AZ........................................... City of Tucson.................. 24.55 5.76 426.21 2002- 4-9,
2006 4-10,
5-10,
5-19
--------------------------------------------------------------------------------------------------------------------------------------------------------
AZ........................................... Pima County..................... 19.51 9.43 206.83 19.25 25.10 76.71 2002- 4-9,
2006 4-10,
5-13,
5-16,
5-28,
5-32
--------------------------------------------------------------------------------------------------------------------------------------------------------
CA........................................... Bay Area Rapid Transit (BART)... 19.34 34.42 56.20 2002- 4-8,
2007 5-5,
7-20
--------------------------------------------------------------------------------------------------------------------------------------------------------
CA........................................... California Department of 14.34 17.00 84.36 18.90 25.50 74.11 2002- Figs.
Transportation (federal funds). 2006 E-26, 29
--------------------------------------------------------------------------------------------------------------------------------------------------------
CA........................................... California Department of 11.41 18.70 61.00 12.04 28.20 42.68 2002- Figs.
Transportation (state funds). 2006 E-69, 70
--------------------------------------------------------------------------------------------------------------------------------------------------------
CA........................................... Los Angeles County Metropolitan 15.01 13.70 109.54 14.44 29.65 48.69 2003- E-42,
Transportation Authority 2007 E-20,
(federal funds). E-21
--------------------------------------------------------------------------------------------------------------------------------------------------------
CA........................................... Los Angeles County Metropolitan 12.20 20.80 58.65 17.81 28.80 61.84 2003- E-13,
Transportation Authority (local 2007 E-22
funds).
--------------------------------------------------------------------------------------------------------------------------------------------------------
CA........................................... Metrolink--Southern California 10.71 16.00 66.97 62.54 24.58 254.40 2003- E-42,
Regional Rail Authority 2007 E-20,
(federal funds). E-21
--------------------------------------------------------------------------------------------------------------------------------------------------------
CA........................................... Metrolink--Southern California 8.60 30.00 28.65 24.73 40.40 61.22 2003- E-13,
Regional Rail Authority (local 2007 E-22
funds).
--------------------------------------------------------------------------------------------------------------------------------------------------------
CA........................................... Orange County Transportation 36.77 26.70 137.70 13.42 23.77 56.47 2003- E-42,
Authority (federal funds). 2007 E-20,
E-21
--------------------------------------------------------------------------------------------------------------------------------------------------------
CA........................................... Orange County Transportation 52.24 30.00 174.13 24.97 31.90 78.27 2003- E-13,
Authority (local funds). 2007 E-22
--------------------------------------------------------------------------------------------------------------------------------------------------------
CA........................................... San Diego Association of 8.49 23.60 35.97 27.59 23.54 117.22 2003- E-42,
Governments (federal funds). 2007 E-20,
E-21
--------------------------------------------------------------------------------------------------------------------------------------------------------
CA........................................... San Diego Association of 0.45 22.50 1.99 18.20 27.70 65.69 2003- E-13,
Governments (local funds). 2007 E-22
--------------------------------------------------------------------------------------------------------------------------------------------------------
CA........................................... San Diego Metropolitan Transit 27.66 33.20 83.30 19.75 26.56 74.37 2003- E-42,
System (federal funds). 2007 E-20,
E-21
--------------------------------------------------------------------------------------------------------------------------------------------------------
CA........................................... San Diego Metropolitan Transit 26.75 36.90 72.49 0.00 32.90 0.00 2003- E-13,
System (local funds). 2007 E-22
--------------------------------------------------------------------------------------------------------------------------------------------------------
CA........................................... San Mateo County Transit 5.56 21.40 26.00 2002 26, 104
District.
--------------------------------------------------------------------------------------------------------------------------------------------------------
CA........................................... Santa Clara Valley 17.10 21.40 79.88 2001- 28, 104,
Transportation Authority. 2006 112
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO........................................... City and County of Denver, 12.86 21.92 58.67 25.41 14.97 169.74 2000- 190
Denver International Airport. 2005
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO........................................... Colorado Department of 10.56 20.21 52.25 4.69 24.07 19.48 1996- 3-20
Transportation. 2000
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO........................................... Colorado Department of 16.58 23.17 71.58 21.21 41.37 51.28 2002- 4-5,
Transportation. 2007 4-6,
4-7,
5-8,
5-10,
6-6,
6-7
--------------------------------------------------------------------------------------------------------------------------------------------------------
CT........................................... Metropolitan District Commission 30.68 19.66 156.07 8.35 18.70 44.64 2005- V-112,
2008 V-114,
V-116,
V-117,
V-119,
V-121,
V-123,
V-125
--------------------------------------------------------------------------------------------------------------------------------------------------------
DC........................................... Washington Suburban Sanitary 29.57 68.38 43.24 31.49 61.12 51.52 2003- 1-15,
Commission. 2009 1-17,
2-5,
2-7,
4-21,
4-23,
4-36,
4-38
--------------------------------------------------------------------------------------------------------------------------------------------------------
FL........................................... Broward County.................. 35.70 40.57 87.99 16.04 44.95 35.68 1991- 4-18,
1999 4-21,
4-28,
4-31,
4-33,
4-37
--------------------------------------------------------------------------------------------------------------------------------------------------------
FL........................................... Broward County.................. 28.62 24.10 118.76 26.86 25.87 103.83 2005- 284
2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
FL........................................... City of Tallahassee............. 28.50 34.03 83.74 1996- 4-13,
2000 4-17,
4-19
--------------------------------------------------------------------------------------------------------------------------------------------------------
FL........................................... Leon County..................... 19.56 11.92 164.04 2004- 4-10,
2008 4-12,
4-13
--------------------------------------------------------------------------------------------------------------------------------------------------------
FL........................................... School District of Hillsborough 30.49 37.58 81.12 24.69 42.99 57.45 2001- 2-5,
County. 2004 2-7,
3-4,
3-6,
5-21,
5-23,
5-32,
5-34
--------------------------------------------------------------------------------------------------------------------------------------------------------
GA........................................... City of Atlanta................. 34.02 57.63 59.04 35.03 56.30 62.21 2001- Vol. I,
2005 19, 21,
22, 30,
46, 59,
62
--------------------------------------------------------------------------------------------------------------------------------------------------------
GA........................................... City of Atlanta (Airport, local 59.17 57.63 102.66 2001- Vol. I,
dollars). 2005 19, 70,
73, 80
--------------------------------------------------------------------------------------------------------------------------------------------------------
GA........................................... City of Atlanta (Airport, 26.30 57.63 45.63 2001- Vol. I,
federal dollars). 2005 19, 83,
86
--------------------------------------------------------------------------------------------------------------------------------------------------------
GA........................................... City of Atlanta (Watershed 23.72 57.63 41.16 2001- Vol. I,
Management). 2005 19, 21,
22, 88,
91, 95
--------------------------------------------------------------------------------------------------------------------------------------------------------
GA........................................... Consolidated Government of 5.91 32.37 18.26 28.65 44.93 63.77 2003- 225
Augusta-Richmond County. 2007
--------------------------------------------------------------------------------------------------------------------------------------------------------
GA........................................... Georgia Department of 8.46 11.03 76.67 1999- 111,
Transportation. 2004 119,
123, 130
--------------------------------------------------------------------------------------------------------------------------------------------------------
GA........................................... Georgia Department of 13.23 21.50 61.52 9.31 24.40 38.17 2009- K-6,
Transportation (federal 2011 K-9
dollars).
--------------------------------------------------------------------------------------------------------------------------------------------------------
GA........................................... Georgia Department of 4.81 25.50 18.87 12.26 26.50 46.27 2009- K-7,
Transportation (state dollars). 2011 K-10
--------------------------------------------------------------------------------------------------------------------------------------------------------
HI........................................... Hawai'i Department of 32.17 54.78 58.70 62.01 51.79 119.73 2003- 331
Transportation. 2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
ID........................................... Idaho Transportation Department. 14.36 16.90 84.95 6.79 12.90 52.63 2002- Figs.
2006 E-11, 20
--------------------------------------------------------------------------------------------------------------------------------------------------------
IL........................................... Illinois Department of 11.00 27.33 40.25 21.22 29.82 71.18 2006- 4-10,
Transportation. 2008 4-11,
5-3,
5-4,
7-18,
7-19,
7-21,
7-22
--------------------------------------------------------------------------------------------------------------------------------------------------------
IL........................................... Illinois State Toll Highway 11.43 19.56 58.44 23.58 19.03 123.91 2000- 49, 50,
Authority. 2005 61, 63
--------------------------------------------------------------------------------------------------------------------------------------------------------
IL........................................... Illinois State Toll Highway 11.38 39.39 28.89 16.42 41.02 40.04 2006- 4-8,
Authority. 2009 4-10,
5-4,
5-6,
7-15,
7-17,
7-20,
7-22
--------------------------------------------------------------------------------------------------------------------------------------------------------
IN........................................... State of Indiana (INDOT and 10.03 10.90 92.03 2006- O-2
INDOA). 2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
IN........................................... State of Indiana (Higher Educ.). 10.69 15.10 70.79 2006- M-2
2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
KS;.......................................... City of Kansas City, KS......... 18.34 25.31 72.44 15.34 36.21 42.37 2002- 3-5,
MO 2004 3-7,
4-4,
4-6,
6-21,
6-23,
6-30,
6-32
--------------------------------------------------------------------------------------------------------------------------------------------------------
KS;.......................................... Kansas City School District, MO. 34.20 25.60 133.58 2002- 3-5,
MO 2004 4-4,
6-21,
6-28
--------------------------------------------------------------------------------------------------------------------------------------------------------
KS........................................... Kansas Department of 10.31 13.75 75.01 2000- 2-10,
Transportation. 2001 2-12,
3-2,
3-3
--------------------------------------------------------------------------------------------------------------------------------------------------------
MD........................................... City of Baltimore............... 23.02 36.63 62.84 30.14 21.60 139.51 1990- 4-20,
1998 4-26,
4-29,
4-31,
4-33,
4-34
--------------------------------------------------------------------------------------------------------------------------------------------------------
MD........................................... City of Baltimore............... 25.85 22.88 112.98 31.88 27.32 116.69 2000- 217
2005
--------------------------------------------------------------------------------------------------------------------------------------------------------
MD........................................... State of Maryland............... 15.81 24.00 65.88 24.52 28.46 86.16 2000- 206
2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
MD........................................... State of Maryland............... 23.45 30.26 77.51 22.31 41.34 53.97 2005- 328
2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
MA........................................... City of Boston.................. 23.76 24.23 98.08 10.26 47.02 21.83 1999- 1-5,
2001 1-7,
2-4,
2-6,
4-22,
4-24,
4-29,
4-31
--------------------------------------------------------------------------------------------------------------------------------------------------------
MA........................................... Division of Capital Asset 19.44 10.39 187.10 33.79 17.86 189.19 1999- 199
Management. 2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
MA........................................... Massachusetts Housing Finance 25.80 10.86 237.57 2000- 203
Agency. 2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
MN........................................... City of Minneapolis............. 7.57 19.54 38.73 13.65 19.08 71.51 2003- 234
2007
--------------------------------------------------------------------------------------------------------------------------------------------------------
MN........................................... City of St. Paul................ 15.23 15.05 101.17 2002- 4-21,
2006 4-22,
4-28,
4-29
--------------------------------------------------------------------------------------------------------------------------------------------------------
MN........................................... St. Paul Housing Authority...... 6.33 10.43 60.67 2002- 6-6,
2006 6-12,
6-18
--------------------------------------------------------------------------------------------------------------------------------------------------------
MN........................................... Metropolitan Airports Commission 2.05 11.28 18.21 2004- 3-8,
2007 3-10,
3-12,
3-13
--------------------------------------------------------------------------------------------------------------------------------------------------------
MN........................................... Metropolitan Council............ 0.16 3.63 4.41 2003- 3-8,
2007 3-10,
3-13
--------------------------------------------------------------------------------------------------------------------------------------------------------
MN........................................... Minnesota Department of 3.42 2.74 124.97 2002- 3-8,
Administration. 2007 3-10,
3-14
--------------------------------------------------------------------------------------------------------------------------------------------------------
MN........................................... Minnesota Department of 5.55 15.18 36.56 2000- 69,
Transportation (federal funds). 2004 72
--------------------------------------------------------------------------------------------------------------------------------------------------------
MN........................................... Minnesota Department of 2.92 15.18 19.24 2000- 69,
Transportation (state funds). 2004 75
--------------------------------------------------------------------------------------------------------------------------------------------------------
MN........................................... Minnesota Department of 2.40 3.52 68.06 2002- 3-7,
Transportation. 2007 3-9,
3-12
--------------------------------------------------------------------------------------------------------------------------------------------------------
MO........................................... Bi-State Development Agency (St. 21.16 20.14 105.06 18.98 15.29 124.13 1997- 167
Louis Metro). 2003
--------------------------------------------------------------------------------------------------------------------------------------------------------
MO........................................... City of St. Louis............... 19.06 15.89 119.97 17.44 27.46 63.52 1995- Ex. pp.
1999 2, 4, 7,
9, 11,
12
--------------------------------------------------------------------------------------------------------------------------------------------------------
MO........................................... The Metropolitan St. Louis Sewer 13.91 15.89 87.54 15.42 27.46 56.16 1995- Ex. pp.
District. 1999 84, 86,
89, 91,
93, 94
--------------------------------------------------------------------------------------------------------------------------------------------------------
MO........................................... Missouri Department of 13.35 20.37 65.56 13.05 21.52 60.66 2005- 220
Transportation (federal funds). 2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
MO........................................... Missouri Department of 6.49 20.19 32.16 12.28 21.48 57.16 2005- 224
Transportation (state funds). 2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
MT........................................... Montana Department of 11.32 2.01 563.36 11.68 16.09 72.58 2000- 4-6,
Transportation. 2006 4-8,
5-18,
5-29,
5-53,
5-64
--------------------------------------------------------------------------------------------------------------------------------------------------------
NV........................................... Nevada Department of 8.70 15.60 55.79 3.03 7.80 38.89 2000- Figs.
Transportation (federal funds). 2006 E-11, 20
--------------------------------------------------------------------------------------------------------------------------------------------------------
NV........................................... Nevada Department of 8.34 12.90 64.65 3.05 10.80 28.26 2000- Figs.
Transportation (state funds). 2006 E-38, 47
--------------------------------------------------------------------------------------------------------------------------------------------------------
NY........................................... State of New York............... 12.39 22.74 54.48 19.43 24.53 79.21 2004- 292
2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
NC........................................... City of Charlotte............... 19.28 35.74 53.95 13.66 18.55 73.66 2005- 3-11,
2010 3-13,
3-15,
3-16,
3-19,
3-20,
3-23
--------------------------------------------------------------------------------------------------------------------------------------------------------
NC........................................... City of Durham and Durham County 12.79 27.38 46.72 1996- 3-4,
1999 3-6,
5-9,
5-11
--------------------------------------------------------------------------------------------------------------------------------------------------------
NC........................................... Durham County................... 6.24 72.85 8.57 20.23 27.30 74.13 2001- 76, 78,
2005 82, 85,
94, 118
--------------------------------------------------------------------------------------------------------------------------------------------------------
NC........................................... North Carolina Department of 13.41 12.70 105.59 1999- 4-16,
Transportation (divisionally- 2003 4-26,
let). 4-49,
4-72,
4-90
--------------------------------------------------------------------------------------------------------------------------------------------------------
NC........................................... North Carolina Department of 9.83 29.92 32.87 14.41 20.00 72.06 1999- 4-52,
Transportation (centrally-let, 2003 4-56,
state funds). 4-70,
4-76,
4-80,
4-90
--------------------------------------------------------------------------------------------------------------------------------------------------------
NC........................................... North Carolina Department of 11.43 29.92 38.22 4.86 20.00 24.30 1999- 4-62,
Transportation (centrally-let, 2003 4-66,
federal funds). 4-70,
4-84,
4-88,
4-90
--------------------------------------------------------------------------------------------------------------------------------------------------------
NC........................................... North Carolina Department of 8.65 24.98 34.62 2004- 89, 90,
Transportation. 2008 138
--------------------------------------------------------------------------------------------------------------------------------------------------------
OH........................................... City of Cincinnati.............. 16.41 18.33 89.51 12.20 22.48 54.28 1995- 44, 45,
2001 49, 50
--------------------------------------------------------------------------------------------------------------------------------------------------------
OH........................................... City of Dayton.................. 4.73 23.91 19.80 2001- 4-11,
2006 4-17,
4-19,
4-20,
4-24
--------------------------------------------------------------------------------------------------------------------------------------------------------
OH........................................... Northeast Ohio Regional Sewer 24.44 22.31 109.55 23.78 22.03 107.94 2004- 263
District. 2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
OK........................................... City of Tulsa................... 4.72 20.77 22.73 24.70 22.51 109.71 2002- 4-8,
2008 4-13,
4-14,
4-15,
4-20,
4-22,
4-23
--------------------------------------------------------------------------------------------------------------------------------------------------------
OK........................................... Oklahoma Department of 19.47 12.40 156.99 3.96 19.10 20.73 2004- K-6,
Transportation (federal funds). 2009 K-9
--------------------------------------------------------------------------------------------------------------------------------------------------------
OK........................................... Oklahoma Department of 19.82 15.40 128.70 5.00 19.90 25.13 2004- K-7,
Transportation (state funds). 2009 K-10
--------------------------------------------------------------------------------------------------------------------------------------------------------
OR........................................... City of Portland................ 7.49 5.10 146.85 34.98 14.60 239.62 2004- L-5,
2009 M-2
--------------------------------------------------------------------------------------------------------------------------------------------------------
OR........................................... Oregon Department of 19.07 27.55 69.20 3.84 46.31 8.30 2000- 4-12,
Transportation. 2007 4-21,
4-25,
4-111,
4-120,
4-123,
4-124
--------------------------------------------------------------------------------------------------------------------------------------------------------
OR........................................... Port of Portland................ 18.59 15.16 122.66 9.94 27.97 35.53 2002- 4-11,
2007 4-13,
4-15,
4-19
--------------------------------------------------------------------------------------------------------------------------------------------------------
OR........................................... Portland Development Commission. 9.29 12.37 75.06 2004- L-2,
2009 L-5
--------------------------------------------------------------------------------------------------------------------------------------------------------
PA........................................... City of Philadelphia............ 12.90 10.80 119.44 2006 17, 21
--------------------------------------------------------------------------------------------------------------------------------------------------------
PA........................................... City of Philadelphia............ 13.80 10.80 127.78 2007 36, 51
--------------------------------------------------------------------------------------------------------------------------------------------------------
PA........................................... City of Philadelphia............ 12.70 10.80 117.59 2008 vi, 45
--------------------------------------------------------------------------------------------------------------------------------------------------------
PA........................................... City of Philadelphia............ 9.30 10.80 86.11 2009 viii, 41
--------------------------------------------------------------------------------------------------------------------------------------------------------
PA........................................... City of Philadelphia............ 17.40 14.90 116.78 2010 vi, vii
--------------------------------------------------------------------------------------------------------------------------------------------------------
PA........................................... City of Philadelphia............ 13.30 11.40 116.67 2011 v, vii
--------------------------------------------------------------------------------------------------------------------------------------------------------
SC........................................... City of Columbia................ 3.42 19.03 17.96 18.15 17.14 105.90 2002- 4-10,
2005 4-15,
4-16,
4-17,
4-24,
4-26
--------------------------------------------------------------------------------------------------------------------------------------------------------
TN........................................... City of Memphis................. 18.77 18.84 99.62 2002- 112,
2007 116, 129
--------------------------------------------------------------------------------------------------------------------------------------------------------
TN........................................... Consolidated Government of 0.37 6.25 5.90 0.04 2.39 1.63 1999- 57, 65,
Nashville and Davidson County 2003 66, 68,
(Metro Purchasing). 69
--------------------------------------------------------------------------------------------------------------------------------------------------------
TN........................................... Consolidated Government of 0.02 4.27 0.40 3.30 7.24 45.58 1999- 58, 98,
Nashville and Davidson County 2003 99, 100,
(Nashville Public Schools). 102
--------------------------------------------------------------------------------------------------------------------------------------------------------
TN........................................... Consolidated Government of 12.70 12.70 100.00 0.20 7.97 2.50 1999- 60, 76,
Nashville and Davidson County 2003 77, 79
(Metro Nashville Airport).
--------------------------------------------------------------------------------------------------------------------------------------------------------
TN........................................... Consolidated Government of 20.70 16.56 125.03 29.33 10.41 281.71 1999- 61, 85,
Nashville and Davidson County 2003 86, 88,
(Metro Development and Housing 89
Authority).
--------------------------------------------------------------------------------------------------------------------------------------------------------
TN........................................... Memphis International Airport... 18.69 27.99 66.77 13.88 34.32 40.44 1999- 229
2005
--------------------------------------------------------------------------------------------------------------------------------------------------------
TN........................................... Nashville International Airport. 9.81 9.68 101.37 7.53 8.87 84.84 2003- 36, 38,
2006 39, 40,
47, 49
--------------------------------------------------------------------------------------------------------------------------------------------------------
TX........................................... City of Austin.................. 29.83 27.54 108.32 39.39 31.79 123.91 2002- 206
2006
--------------------------------------------------------------------------------------------------------------------------------------------------------
TX........................................... City of Arlington............... 10.94 66.58 16.43 13.11 54.03 24.27 2002- 2-9,
2007 2-11,
3-5,
3-7,
3-9,
5-24,
5-26,
5-33,
5-35,
5-37
--------------------------------------------------------------------------------------------------------------------------------------------------------
TX........................................... City of Fort Worth.............. 38.41 60.28 63.72 60.81 54.05 112.51 2002- 2-9,
2007 2-11,
3-5,
3-7,
5-26,
5-28,
5-37,
5-39
--------------------------------------------------------------------------------------------------------------------------------------------------------
TX........................................... DFW Airport..................... 50.72 62.82 80.74 57.53 53.80 106.93 2002- 2-9,
2007 2-11,
3-5,
3-7,
5-26,
5-28,
5-37,
5-39
--------------------------------------------------------------------------------------------------------------------------------------------------------
TX........................................... Fort Worth Independent School 27.75 66.06 42.01 28.91 53.89 53.64 2002- 2-9,
District. 2007 2-11,
3-4,
3-6,
5-26,
5-28,
5-37,
5-39
--------------------------------------------------------------------------------------------------------------------------------------------------------
TX........................................... North Texas Tollway Authority... 18.60 58.34 31.88 14.75 53.56 27.54 2003- 2-9,
2007 2-11,
3-4,
3-6,
5-26,
5-28,
5-37,
5-39
--------------------------------------------------------------------------------------------------------------------------------------------------------
TX........................................... City of Houston................. 29.87 34.74 85.97 2005- 191
2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
TX........................................... City of San Antonio............. 35.19 28.14 125.09 2004- 3-9,
2007 3-15,
3-16,
3-17
--------------------------------------------------------------------------------------------------------------------------------------------------------
TX........................................... Dallas Area Rapid Transit 31.44 68.38 45.98 1996- 3-5,
Authority (DART). 2001 4-5,
4-7,
6-22,
6-29,
6-31
--------------------------------------------------------------------------------------------------------------------------------------------------------
TX........................................... State of Texas.................. 13.71 51.57 26.58 18.27 55.74 32.79 2002- 3-8,
2005 3-10,
4-6,
4-12,
6-21,
6-23,
6-37,
6-39
--------------------------------------------------------------------------------------------------------------------------------------------------------
TX........................................... State of Texas (TxDOT).......... 7.07 10.14 69.67 2006- 4-10,
2008 4-19,
5-11
--------------------------------------------------------------------------------------------------------------------------------------------------------
TX........................................... State of Texas (State Agencies). 24.04 22.10 108.78 2006- 4-10,
2008 4-20,
4-21,
5-11
--------------------------------------------------------------------------------------------------------------------------------------------------------
TX........................................... State of Texas (Universities)... 21.66 22.10 98.01 2006- 4-10,
2008 4-20,
4-21,
5-11
--------------------------------------------------------------------------------------------------------------------------------------------------------
TX........................................... State of Texas (Medical 21.95 22.10 99.29 2006- 4-10,
Institutions). 2008 4-20,
4-21,
5-11
--------------------------------------------------------------------------------------------------------------------------------------------------------
UT........................................... Salt Lake City International 5.32 17.03 31.24 0.79 18.25 4.33 2001- 258
Airport. 2006
--------------------------------------------------------------------------------------------------------------------------------------------------------
VA........................................... Commonwealth of Virginia........ 3.39 15.55 21.78 2006- 4-10,
2009 4-12,
4-20,
4-26
--------------------------------------------------------------------------------------------------------------------------------------------------------
VA........................................... Commonwealth of Virginia........ 1.35 14.66 9.19 1998- 4-16,
2002 4-23,
4-27,
4-32
--------------------------------------------------------------------------------------------------------------------------------------------------------
VA........................................... Virginia DOT (federal funds).... 6.59 10.26 64.21 9.53 15.89 59.99 1998- 11, 15,
2002 18, 22,
26, 29
--------------------------------------------------------------------------------------------------------------------------------------------------------
VA........................................... Virginia DOT (state funds)...... 8.52 10.26 82.99 5.41 15.89 34.08 1998- 34, 38,
2002 41, 45,
49, 52
--------------------------------------------------------------------------------------------------------------------------------------------------------
WA........................................... Washington Department of 14.32 19.59 73.10 10.44 14.88 70.16 1999- 63, 66,
Transportation (federal funds). 2003 72
--------------------------------------------------------------------------------------------------------------------------------------------------------
WA........................................... Washington Department of 2.97 19.59 15.16 10.66 14.88 71.64 1999- 63, 69,
Transportation (state funds). 2003 75
--------------------------------------------------------------------------------------------------------------------------------------------------------
WI........................................... City of Milwaukee............... 18.94 40.91 46.29 2005 5-11,
6-5,
6-26
--------------------------------------------------------------------------------------------------------------------------------------------------------
WI........................................... City of Milwaukee............... 31.21 13.77 226.74 2005- 4-7,
2008 4-9,
5-2,
5-7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Disparity indexes of 80 or lower are highlighted in boldface type. Disparity indexes above 80 but lower than 100 are highlighted in boldface
italic type.
C. There is Strong Evidence of Disparities Between Utilization and
Availability in Aggregate U.S. Business Enterprise Activity
A key rationale for the advent of public sector policies such as
the USDOT DBE Program was the Federal Government's desire to prevent
its own passive participation in private sector discrimination in
business enterprise activity.\23\ Therefore, it is important to examine
the best available evidence regarding how minorities and women fare in
the economy as a whole with respect to business enterprise activity. In
order to do this, I present evidence from the U.S. Census Bureau's past
and present data collection efforts dedicated to M/WBEs.
---------------------------------------------------------------------------
\23\ City of Richmond v. J. A. Croson Company, 488 U.S. 469, at 492
(``Thus, if the city could show that it had essentially become a
'passive participant' in a system of racial exclusion practiced by
elements of the local construction industry, we think it clear that the
city could take affirmative steps to dismantle such a system.'').
---------------------------------------------------------------------------
The Survey of Business Owners and Self-Employed Persons (SBO)
collected data on the number, sales, employment, and payrolls of
businesses owned by minorities, women, and non-minority males. This
survey was conducted every 5 years from 1972 to 2012 as part of the
Economic Census program. Data from the 2012 SBO, the most recent
available, were released in December 2015. In mid-2018, the Census
Bureau announced that the SBO would be discontinued and only partially
replaced with a new survey called the Annual Business Survey (ABS).\24\
Unfortunately, the ABS is restricted to firms with paid employees only,
as opposed to the SBO that also included nonemployer firms.\25\ Data
from the 2017 ABS, the most recent available, were released in May
2020.\26\ The SBO and ABS cover women and five groups of minorities:
(1) African Americans, (2) Hispanics, (3) Asians, (4) Native Hawaiians
and Other Pacific Islanders, and (5) American Indians and Alaskan
Natives. Comparative information for non-minority male-owned firms is
also included.\27\
---------------------------------------------------------------------------
\24\ U.S. Census Bureau (2018e).
\25\ U.S. Census Bureau (2018f). In 2012, according to the SBO,
there were about 5.1 million firms with paid employees and more than 22
million nonemployer firms.
\26\ U.S. Census Bureau (2020c).
\27\ In the American Community Survey Public Use Microdata Samples
(ACS PUMS), discussed below, the unit of analysis is the business
owner, or self-employed person. In the SBO and ABS data, the unit of
analysis is the business itself rather than the business owner.
Furthermore, unlike most other business statistics, including the other
components of the Economic Census, the unit of analysis in the SBO and
ABS is the firm, rather than the establishment.
---------------------------------------------------------------------------
The SBO and ABS contain a wealth of information on the character of
minority and female business enterprise in the U.S. as a whole as well
as in individual states and sub-state divisions.\28\ In the remainder
of this section, I present national evidence from the 2012 SBO and the
2017 ABS for the economy as whole, as well as for the construction and
architecture/engineering industries that are the main beneficiaries of
Federal surface and aviation transportation funding.
---------------------------------------------------------------------------
\28\ Appendix A, below, provides state-level data from the 2017
ABS. Appendices B, C and D, below, provide state-level data from the
2012, 2007 and 2002 SBO.
---------------------------------------------------------------------------
1. Results from the 2012 Survey of Business Owners
a. Economy-Wide Results
I begin with the 2012 SBO--the most recent and last data from this
important survey. Table 3 contains data for the U.S. as a whole and the
economy-wide (i.e. all industries combined). Panel A in this table
summarizes the SBO results for each race and/or sex grouping. For
example, Panel A shows a total of 27.18 million firms in the U.S. in
2012 (column 1) with overall sales and receipts of $11.964 trillion
(column 2). Of these 27.18 million firms, 5.14 million had one or more
employees (column 3) and these 5.14 million firms had overall sales and
receipts of $10.965 trillion (column 4). Column (5) shows a total of
56.059 million employees on the payroll of these 5.14 million firms and
a total annual payroll expense of $2.096 trillion (column 6).
The remaining rows in Panel A provide comparable statistics for
nonminority male-owned, women-owned, and minority-owned firms. For
example, Table 3 shows that there were 2.6 million African American-
owned firms counted in the SBO, and that these 2.6 million firms
registered $150.2 billion in sales and receipts. It also shows that
109,137 of these African American-owned firms had one or more
employees, and that they employed a total of 975,052 workers with an
annual payroll total of $27.69 billion.
Panel B in Table 3 converts the figures in Panel A to percentage
distributions within each column. For example, Column (1) in Panel B of
Table 3 shows that African American-owned firms were 9.51 percent of
all firms in the U.S. and women-owned firms were 36.35 percent.
Additionally, 12.16 percent of firms were Hispanic-owned, 7.06 percent
were Asian-owned, 1.0 percent were American Indian- and Alaska Native-
owned, and 0.20 percent were Native Hawaiian- and Other Pacific
Islander-owned.
Column (2) in Panel B provides the same percentage distribution for
overall sales and receipts. Table 3, for example, shows that
nonminority males owned 45.18 percent of all firms and earned 73.45
percent of all sales and receipts. In contrast:
Although African Americans owned 9.51 percent of all
firms in the U.S. in 2012, they earned only 1.26 percent of all sales
and receipts.
Although Hispanics owned 12.16 percent of all firms, they
earned only 3.96 percent, of all sales and receipts.
Although Asians owned 7.06 percent of all firms, they
earned only 5.85 percent, of all sales and receipts.
Although American Indians and Alaska Natives owned 1.0
percent of all firms, they earned only 0.32 percent of all sales and
receipts.
Although Native Hawaiians and Other Pacific Islanders
owned 0.20 percent of all firms, they earned only 0.07 percent of all
sales and receipts.
Although women owned firms 36.35 percent of all firms,
they earned only 11.87 percent of all sales and receipts.
These disparities between the availability and utilization of
minority- and women-owned firms can be viewed directly from the
disparity indexes in Panel C of Table 3. For example, Panel C shows
that African American-owned firms in 2012 received just 13.2 percent of
what would be expected based on their availability in the market. Panel
C shows as well that women-owned firms received just 32.65 percent of
what would be expected based on their availability in the market. For
Hispanics, the figure was 32.55 percent. For Asians, the figure was
82.85 percent. For American Indians and Alaska Natives, the figure was
32.33 percent, and for Native Hawaiians and Other Pacific Islanders,
the figure was 33.76 percent. These disparities are all adverse, and
statistically significant. The disparities are all large as well, with
the exception of Asian-owned firms.
We can also compare sales and receipts per firm among all firms in
2012. In Table 3, for example, average per firm sales and receipts for
non-minority male-owned firms was $715.6 thousand. In contrast:
For African American-owned employer firms, average per
firm sales and receipts was $58.1 thousand. In other words, for every
dollar of sales and receipts earned by non-minority male-owned firms,
African American-owned firms received just 8 cents.
For Hispanic-owned firms, average per firm sales and
receipts was $143.3 thousand. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Hispanic-owned
firms received just 20 cents.
For Asian-owned firms, average per firm sales and
receipts was $364.7 thousand. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Asian-owned firms
received just 51 cents.
For American Indian- and Alaska Native-owned firms,
average per firm sales and receipts was $142.3 thousand. In other
words, for every dollar of sales and receipts earned by non-minority
male-owned firms, American Indian- and Alaska Native-owned firms
received just 20 cents.
For Native Hawaiian- and Other Pacific Islander-owned
firms, average per firm sales and receipts was $148.6 thousand. In
other words, for every dollar of sales and receipts earned by non-
minority male-owned firms, Native Hawaiian- and Other Pacific Islander-
owned firms received just 21 cents.
For women-owned firms, average per firm sales and
receipts was $143.7 thousand. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, women-owned firms
received just 20 cents.
Turning to employer firms, we see from column (3) in Table 3, that
although nonminority male-owned firms were 57.11 percent of all
employer firms, they accounted for 74.98 percent of all employer firm
sales and receipts. In contrast:
Although African Americans owned 2.12 percent of all
employer firms in the U.S. in 2012, they earned only 0.94 percent of
all sales and receipts.
Although Hispanics firms 5.6 percent of all employer
firms, they earned only 3.47 percent of all sales and receipts.
Although Asians owned 9.37 percent of all employer firms,
they earned only 5.72 percent of all sales and receipts.
Although American Indians and Alaska Natives owned 0.51
percent of all employer firms, they earned only 0.29 percent of all
sales and receipts.
Although Native Hawaiians and Other Pacific Islanders
owned 0.09 percent of all employer firms, they earned only 0.06 percent
of all sales and receipts.
Although women owned 20.16 percent of all employer firms,
they earned only 10.86 percent of all sales and receipts.
The economy-wide employer firm disparity indexes for 2012 appear in
Panel C of Table 3. Panel C shows that African American-owned firms in
2012 received just 44.4 percent of what would be expected based on
their availability in the market. Women-owned firms received just 53.85
percent of what would be expected based on their availability in the
market. For Hispanics, the figure was 61.91 percent. For Asians, the
figure was 61.11 percent. For American Indians and Alaska Natives, the
figure was 56.64 percent, and for Native Hawaiians and Other Pacific
Islanders, the figure was 64.40 percent. These disparities are all
large, adverse, and statistically significant.
Considering sales and receipts among employer firms in 2012. Table
3 shows a figure of $2.8 million for non-minority male-owned employer
firms. In contrast:
For African American-owned employer firms, average per
firm sales and receipts was $947.9 thousand. In other words, for every
dollar of sales and receipts earned by non-minority male-owned firms,
African American-owned firms received just 34 cents.
For Hispanic-owned firms, average per firm sales and
receipts was $1.32 million. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Hispanic-owned
firms received just 47 cents.
For Asian-owned firms, average per firm sales and
receipts was $1.3 million. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Asian-owned firms
received just 47 cents.
For American Indian- and Alaska Native-owned firms,
average per firm sales and receipts was $1.21 million. In other words,
for every dollar of sales and receipts earned by non-minority male-
owned firms, American Indian- and Alaska Native-owned firms received
just 43 cents.
For Native Hawaiian- and Other Pacific Islander-owned
firms, average per firm sales and receipts was $1.37 million. In other
words, for every dollar of sales and receipts earned by non-minority
male-owned firms, Native Hawaiian- and Other Pacific Islander-owned
firms received just 49 cents.
For women-owned firms, average per firm sales and
receipts was $1.15 million. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, women-owned firms
received just 41 cents.
The problem of minority- and women-owned firms earning less has
important consequences that ripple throughout the economy. Because
these firms make less, they have to pay their employees less. This
obviously compounds race and gender disparities to the extent that
minority- and women-owned firms hire proportionately more minority and
female employees. In addition, it reduces the wealth accruing to
minorities and women and thus hinders any would-be minority and women
entrepreneurs in their efforts to create and grow their own firms thus
reinforcing the negative consequences of social and economic
disadvantage. Table 3 shows that average payroll per employee at non-
minority male-owned employer firms in 2012 was $40,573. In contrast:
For African American-owned employers, average payroll per
employee was just $28,398. In other words, for every $1 in wages earned
by employees at non-minority male-owned firms, employees at African
American-owned firms earned only 70 cents.
For Hispanic-owned employers average payroll per employee
was just $30,416. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at Hispanic-owned
firms earned only 75 cents.
For Asian-owned employers average payroll per employee
was just $30,942. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at Asian-owned
firms earned only 76 cents.
For American Indian- and Alaska Native-owned employers
average payroll per employee was just $33,599. In other words, for
every $1 in wages earned by employees at non-minority male-owned firms,
employees at American Indian- and Alaska Native-owned firms earned just
83 cents.
For Native Hawaiian- and Other Pacific Islander-owned
employers, average payroll per employee was just $36,681. In other
words, for every $1 in wages earned by employees at non-minority male-
owned firms, employees at Native Hawaiian- and Other Pacific Islander-
owned firms earned just 90 cents.
For women-owned employers average payroll per employee
was just $31,278. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at women-owned
firms earned only 77 cents.
Table 3. Disparity Ratios from the 2012 Survey of Business Owners, United States, All Industries
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Sales and Employer Sales and Employees Payroll
Firms Receipts Firms Receipts ------------- ($000s)
------------- ($000s) ------------- ($000s) ---------------
----------------- ----------------- (5)
(1) (2) (3) (4) (6)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Panel A. Levels....................................................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Firms...................................................... 27,179,380 11,964,077,871 5,136,203 10,964,584,749 56,058,563 2,096,442,212
Non-minority male.............................................. 12,280,591 8,787,915,377 2,933,198 8,221,010,815 37,750,711 1,531,662,394
African American............................................... 2,584,403 150,203,163 109,137 103,451,510 975,052 27,689,957
Hispanic....................................................... 3,305,873 473,635,944 287,501 379,994,999 2,329,553 70,855,704
Asian.......................................................... 1,917,902 699,492,422 481,026 627,532,399 3,572,577 110,543,615
Native Hawaiian/Pac. Islander.................................. 54,749 8,136,445 4,706 6,469,957 39,001 1,430,591
Am. Indian & Alaska Native..................................... 272,919 38,838,125 26,179 31,654,165 208,178 6,994,509
Female......................................................... 9,878,397 1,419,834,295 1,035,655 1,190,586,438 8,431,614 263,720,252
--------------------------------------------------------------------------------------------------------------------------------------------------------
Panel B. Column Percentages...............................................................................................--------------------------------------------------------------------------------------------------------------------------------------------------------
All Firms...................................................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Non-minority male.............................................. 45.18% 73.45% 57.11% 74.98% 67.34% 73.06%
African American............................................... 9.51% 1.26% 2.12% 0.94% 1.74% 1.32%
Hispanic....................................................... 12.16% 3.96% 5.60% 3.47% 4.16% 3.38%
Asian.......................................................... 7.06% 5.85% 9.37% 5.72% 6.37% 5.27%
Native Hawaiian/Pac. Islander.................................. 0.20% 0.07% 0.09% 0.06% 0.07% 0.07%
Am. Indian & Alaska Native..................................... 1.00% 0.32% 0.51% 0.29% 0.37% 0.33%
Female......................................................... 36.35% 11.87% 20.16% 10.86% 15.04% 12.58%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Panel C. Disparity Ratios (2) vs. (1) (4) vs. (3) (5) vs. (3) (6) vs. (3)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-minority male...........................................................
African American............................................................
Hispanic....................................................................
Asian.......................................................................
Native Hawaiian/Pac. Islander...............................................
Am. Indian & Alaska Native..................................................
Female......................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Author's calculations using 2012 SBO. Notes: (1) Figures are rounded. Rounding was performed subsequent to any mathematical calculations; (2)
Excludes publicly owned, foreign-owned, and not-for-profit firms; (3) Totals for ``All Firms'' includes firms that were equally nonminority-minority
owned; (4) Statistically significant disparity indexes are italicized; (5) ``n/a'' indicates that data were not disclosed due to confidentiality or
other publication restrictions.
b. Results for the Construction Sector
Table 4 shows comparable 2012 SBO data for the construction sector
in the U.S. as a whole.
Column (2) in Panel B of Table 4 shows that nonminority males owned
62.85 percent of all firms and earned 78.02 percent of all sales and
receipts. In contrast:
Although African Americans owned 4.67 percent of all
firms in the U.S. in 2012, they earned only 0.93 percent of all sales
and receipts.
Although Hispanics owned 16.24 percent of all firms, they
earned only 4.65 percent, of all sales and receipts.
Although Asians owned 2.63 percent of all firms, they
earned only 1.28 percent, of all sales and receipts.
Although American Indians and Alaska Natives owned 1.23
percent of all firms, they earned only 0.62 percent of all sales and
receipts.
Although Native Hawaiians and Other Pacific Islanders
owned 0.19 percent of all firms, they earned only 0.13 percent of all
sales and receipts.
Although women owned firms 9.08 percent of all firms,
they earned only 7.75 percent of all sales and receipts.
The associated 2012 disparity indexes for firms in the construction
sector can be viewed directly in Panel C of Table 4. Panel C shows that
African American-owned firms in 2012 received just 19.88 percent of
what would be expected based on their availability in the market. Panel
C shows as well that women-owned firms received 85.37 percent of what
would be expected based on their availability in the market. For
Hispanics, the figure was 28.64 percent. For Asians, the figure was
48.74 percent. For American Indians and Alaska Natives, the figure was
50.19 percent, and for Native Hawaiians and Other Pacific Islanders,
the figure was 66.26 percent. These disparities are all adverse, and
statistically significant. The disparities are all large as well, with
the exception of women-owned firms.
We can also compare sales and receipts per firm among all firms in
construction in 2012. In Table 4 average per firm sales and receipts
for non-minority male-owned firms was $508.9 thousand. In contrast:
For African American-owned employer firms, average per
firm sales and receipts was $81.5 thousand. In other words, for every
dollar of sales and receipts earned by non-minority male-owned firms,
African American-owned firms received just 16 cents.
For Hispanic-owned firms, average per firm sales and
receipts was $117.4 thousand. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Hispanic-owned
firms received just 23 cents.
For Asian-owned firms, average per firm sales and
receipts was $199.8 thousand. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Asian-owned firms
received just 39 cents.
For American Indian- and Alaska Native-owned firms,
average per firm sales and receipts was $205.8 thousand. In other
words, for every dollar of sales and receipts earned by non-minority
male-owned firms, American Indian- and Alaska Native-owned firms
received just 40 cents.
For Native Hawaiian- and Other Pacific Islander-owned
firms, average per firm sales and receipts was $271.7 thousand. In
other words, for every dollar of sales and receipts earned by non-
minority male-owned firms, Native Hawaiian- and Other Pacific Islander-
owned firms received just 53 cents.
For women-owned firms, average per firm sales and
receipts was $350 thousand. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, women-owned firms
received just 69 cents.
Turning to employer firms, we see from column (3) in Table 4, that
although nonminority male-owned firms were 69.87 percent of all
employer firms, they accounted for 79.09 percent of all employer firm
sales and receipts. In contrast:
Although African Americans owned 1.19 percent of all
employer firms in the U.S. in 2017, they earned only 0.77 percent of
all sales and receipts.
Although Hispanics firms 6.07 percent of all employer
firms, they earned only 3.59 percent of all sales and receipts.
Although Asians owned 1.66 percent of all employer firms,
they earned only 1.19 percent of all sales and receipts.
Although American Indians and Alaska Natives owned 0.76
percent of all employer firms, they earned only 0.57 percent of all
sales and receipts.
Native Hawaiians and Other Pacific Islanders owned 0.11
percent of all employer firms, and they earned 0.12 percent of all
sales and receipts, essentially at parity.
Although women owned 8.55 percent of all employer firms,
they earned only 7.86 percent of all sales and receipts.
The employer firm disparity indexes for construction in 42012
appear in Panel C of Table 4. Panel C shows that African American-owned
firms in 2012 received just 64.51 percent of what would be expected
based on their availability in the market. Women-owned firms received
just 91.88 percent of what would be expected based on their
availability in the market. For Hispanics, the figure was 59.14
percent. For Asians, the figure was 71.94 percent. For American Indians
and Alaska Natives, the figure was 74.52 percent, and for Native
Hawaiians and Other Pacific Islanders, the figure was 101.89 percent.
The disparities for African Americans, Hispanics, Asians and American
Indians and Alaska Natives are all large, adverse, and statistically
significant. The disparity for women is adverse, and statistically
significant. The disparity for Native Hawaiians and Other Pacific
Islanders is not statistically significant.
Considering sales and receipts among employer firms in 2012, Table
4 shows a figure of $1.92 million for non-minority male-owned employer
firms. In contrast:
For African American-owned employer firms, average per
firm sales and receipts was $1.1 million. In other words, for every
dollar of sales and receipts earned by non-minority male-owned firms,
African American-owned firms received just 57 cents.
For Hispanic-owned firms, average per firm sales and
receipts was $1.01 million. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Hispanic-owned
firms received just 52 cents.
For Asian-owned firms, average per firm sales and
receipts was $1.22 million. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Asian-owned firms
received just 64 cents.
For American Indian- and Alaska Native-owned firms,
average per firm sales and receipts was $1.27 million. In other words,
for every dollar of sales and receipts earned by non-minority male-
owned firms, American Indian- and Alaska Native-owned firms received
just 66 cents.
For Native Hawaiian- and Other Pacific Islander-owned
firms, average per firm sales and receipts was $1.73 million. In other
words, for every dollar of sales and receipts earned by non-minority
male-owned firms, Native Hawaiian- and Other Pacific Islander-owned
firms received just 90 cents.
For women-owned firms, average per firm sales and
receipts was $1.56 million. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, women-owned firms
received just 81 cents.
As discussed above, these disparities extend to the employees of
minority- and women-owned firms as well and thus cause a ripple effect
that further damages women and minorities. Table 4 shows that average
payroll per employee at non-minority male-owned employer firms in 2012
was $48,736. In contrast:
For African American-owned employers, average payroll per
employee was just $42,824. In other words, for every $1 in wages earned
by employees at non-minority male-owned firms, employees at African
American-owned firms earned only 88 cents.
For Hispanic-owned employers average payroll per employee
was just $37,977. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at Hispanic-owned
firms earned only 78 cents.
For Asian-owned employers average payroll per employee
was just $45,450. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at Asian-owned
firms earned only 93 cents.
For American Indian- and Alaska Native-owned employers
average payroll per employee was just $44,763. In other words, for
every $1 in wages earned by employees at non-minority male-owned firms,
employees at American Indian- and Alaska Native-owned firms earned just
92 cents.
For Native Hawaiian- and Other Pacific Islander-owned
firms, on the other hand, was $49,870. In other words, for every $1 in
wages earned by employees at non-minority male-owned firms, employees
at Native Hawaiian- and Other Pacific Islander-owned firms earned
$1.02--essentially at par with non-minority male-owned firms.
For women-owned employers average payroll per employee
was just $46,509. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at women-owned
firms earned only 95 cents.
Table 4. Disparity Ratios from the 2012 Survey of Business Owners, United States, Construction
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Sales and Employer Sales and Employees Payroll
Firms Receipts Firms Receipts ------------- ($000s)
------------- ($000s) ------------- ($000s) ---------------
----------------- ----------------- (5)
(1) (2) (3) (4) (6)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Panel A. Levels....................................................................................................--------------------------------------------------------------------------------------------------------------------------------------------------------
All Firms...................................................... 2,928,015 1,200,413,658 637,296 1,083,093,941 4,764,280 225,039,336
Non-minority male.............................................. 1,840,218 936,510,929 445,288 856,603,507 3,581,982 174,571,576
African American............................................... 136,729 11,141,919 7,594 8,325,857 39,883 1,707,968
Hispanic....................................................... 475,472 55,830,007 38,704 38,900,840 222,161 8,437,113
Asian.......................................................... 76,883 15,362,433 10,567 12,919,296 54,404 2,472,635
Native Hawaiian/Pac. Islander.................................. 5,551 1,507,949 724 1,253,656 4,803 239,527
Am. Indian & Alaska Native..................................... 35,969 7,401,462 4,836 6,124,399 29,700 1,329,464
Female......................................................... 265,733 93,002,152 54,511 85,116,364 435,718 20,264,904
--------------------------------------------------------------------------------------------------------------------------------------------------------
Panel B. Column Percentages...............................................................................................--------------------------------------------------------------------------------------------------------------------------------------------------------
All Firms...................................................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Non-minority male.............................................. 62.85% 78.02% 69.87% 79.09% 75.18% 77.57%
African American............................................... 4.67% 0.93% 1.19% 0.77% 0.84% 0.76%
Hispanic....................................................... 16.24% 4.65% 6.07% 3.59% 4.66% 3.75%
Asian.......................................................... 2.63% 1.28% 1.66% 1.19% 1.14% 1.10%
Native Hawaiian/Pac. Islander.................................. 0.19% 0.13% 0.11% 0.12% 0.10% 0.11%
Am. Indian & Alaska Native..................................... 1.23% 0.62% 0.76% 0.57% 0.62% 0.59%
Female......................................................... 9.08% 7.75% 8.55% 7.86% 9.15% 9.01%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Panel C. Disparity Ratios....................................................................................................--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-minority male...........................................................
African American............................................................
Hispanic....................................................................
Asian.......................................................................
Native Hawaiian/Pac. Islander............................................... 101.89 88.74 93.69
Am. Indian & Alaska Native..................................................
Female......................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source and Notes: See Table 6.
c. Results for the Professional, Scientific, and Technical
Services Sector
Table 8 shows comparable 2012 SBO data for the professional,
scientific, and technical services sector in the U.S. as a whole.
Column (2) in Panel B of Table 8 shows that nonminority males owned
47.45 percent of all firms and earned 66.95 percent of all sales and
receipts. In contrast:
Although African Americans owned 5.35 percent of all
firms in the U.S. in 2012, they earned only 1.79 percent of all sales
and receipts.
Although Hispanics owned 7.19 percent of all firms, they
earned only 3.82 percent of all sales and receipts.
Although Asians owned 7.16 percent of all firms, they
earned 7.72 percent of all sales and receipts.
Although American Indians and Alaska Natives owned 0.8
percent of all firms, they earned only 0.36 percent of all sales and
receipts.
Although Native Hawaiians and Other Pacific Islanders
owned 0.16 percent of all firms, they earned only 0.11 percent of all
sales and receipts.
Although women-owned firms were 34.5 percent of all
firms, they earned only 15.81 percent of all sales and receipts.
The associated 2012 disparity indexes for firms in the construction
sector can be viewed directly in Panel C of Table 8. Panel C shows that
African American-owned firms in 2012 received just 33.42 percent of
what would be expected based on their availability in the market. Panel
C shows as well that women-owned firms received 45.82 percent of what
would be expected based on their availability in the market. For
Hispanics, the figure was 53.17 percent. For Asians, the figure was
107.9 percent. For American Indians and Alaska Natives, the figure was
45.12 percent, and for Native Hawaiians and Other Pacific Islanders,
the figure was 65.32 percent. With the exception of Asians, these
disparities are all large, adverse, and statistically significant.
We can also compare sales and receipts per firm among all firms in
professional services in 2012. In Table 8, average per firm sales and
receipts for non-minority male-owned firms was $319.9 thousand. In
contrast:
For African American-owned employer firms, average per
firm sales and receipts was $75.8 thousand. In other words, for every
dollar of sales and receipts earned by non-minority male-owned firms,
African American-owned firms received just 24 cents.
For Hispanic-owned firms, average per firm sales and
receipts was $120.6 thousand. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Hispanic-owned
firms received just 38 cents.
For Asian-owned firms, average per firm sales and
receipts was $244.78 thousand. In other words, for every dollar of
sales and receipts earned by non-minority male-owned firms, Asian-owned
firms received just 76 cents.
For American Indian- and Alaska Native-owned firms,
average per firm sales and receipts was $102.3 thousand. In other
words, for every dollar of sales and receipts earned by non-minority
male-owned firms, American Indian- and Alaska Native-owned firms
received just 32 cents.
For Native Hawaiian- and Other Pacific Islander-owned
firms, average per firm sales and receipts was $148.1 thousand. In
other words, for every dollar of sales and receipts earned by non-
minority male-owned firms, Native Hawaiian- and Other Pacific Islander-
owned firms received just 46 cents.
For women-owned firms, average per firm sales and
receipts was $103.9 thousand. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, women-owned firms
received just 32 cents.
Turning to employer firms, we see from column (3) in Table 8, that
although nonminority male-owned firms were 59 percent of all employer
firms, they accounted for 69.13 percent of all employer firm sales and
receipts. In contrast:
Although African Americans owned 1.85 percent of all
employer firms in the U.S. in 2012, they earned only 1.52 percent of
all sales and receipts.
Although Hispanics firms 3.95 percent of all employer
firms, they earned only 3.45 percent of all sales and receipts.
Asians owned 6.79 percent of all employer firms, and they
earned 7.9 percent of all sales and receipts.
Although American Indians and Alaska Natives owned 0.48
percent of all employer firms, they earned only 0.3 percent of all
sales and receipts.
Native Hawaiians and Other Pacific Islanders owned 0.08
percent of all employer firms, and they earned 0.1 percent of all sales
and receipts.
Although women owned 22.1 percent of all employer firms,
they earned only 13.81 percent of all sales and receipts.
The employer firm disparity indexes for construction in 42012
appear in Panel C of Table 8. Panel C shows that African American-owned
firms in 2012 received just 82.26 percent of what would be expected
based on their availability in the market. Women-owned firms received
just 62.47 percent of what would be expected based on their
availability in the market. For Hispanics, the figure was 87.16
percent. For Asians, the figure was 116.31 percent. For American
Indians and Alaska Natives, the figure was 60.94 percent, and for
Native Hawaiians and Other Pacific Islanders, the figure was 116.31
percent. The disparities for women and American Indians and Alaska
Natives are large, adverse, and statistically significant. The
disparities for African Americans and Hispanics are adverse and
statistically significant. The disparities for Asians is not adverse
and is statistically significant. The disparity for Native Hawaiians
and Other Pacific Islanders is not statistically significant.
Considering sales and receipts among employer firms in 2012, Table
8 shows a figure of $1.16 million for non-minority male-owned employer
firms. In contrast:
For African American-owned employer firms, average per
firm sales and receipts was $816.2 thousand. In other words, for every
dollar of sales and receipts earned by non-minority male-owned firms,
African American-owned firms received just 70 cents.
For Hispanic-owned firms, average per firm sales and
receipts was $864.9 thousand. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Hispanic-owned
firms received just 74 cents.
For Asian-owned firms, average per firm sales and
receipts was $1.15 million. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Asian-owned firms
received just 99 cents, just slightly below parity.
For American Indian- and Alaska Native-owned firms,
average per firm sales and receipts was $604.7 thousand. In other
words, for every dollar of sales and receipts earned by non-minority
male-owned firms, American Indian- and Alaska Native-owned firms
received just 52 cents.
For Native Hawaiian- and Other Pacific Islander-owned
firms, average per firm sales and receipts was $1.27 million. In other
words, for every dollar of sales and receipts earned by non-minority
male-owned firms, Native Hawaiian- and Other Pacific Islander-owned
firms received just $1.10, slightly above parity.
For women-owned firms, average per firm sales and
receipts was $619.9 thousand. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, women-owned firms
received just 53 cents.
Considering the employees of minority- and women-owned employer
firms in the professional services sector, Table 8 shows that average
payroll per employee at non-minority male-owned employer firms in 2012
was $63,240. In contrast:
For African American-owned employers, average payroll per
employee was just $54,911. In other words, for every $1 in wages earned
by employees at non-minority male-owned firms, employees at African
American-owned firms earned only 88 cents.
For Hispanic-owned employers average payroll per employee
was just $51,813. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at Hispanic-owned
firms earned only 78 cents.
For Asian-owned employers average payroll per employee
was just $66,788. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at Asian-owned
firms earned only 93 cents.
For American Indian- and Alaska Native-owned employers
average payroll per employee was just $44,013. In other words, for
every $1 in wages earned by employees at non-minority male-owned firms,
employees at American Indian- and Alaska Native-owned firms earned just
92 cents.
For women-owned employers average payroll per employee
was just $49,128. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at women-owned
firms earned only 95 cents.
Payroll per employee for Native Hawaiian- and Other Pacific
Islander-owned firms, on the other hand, was $69,386. In other words,
for every $1 in wages earned by employees at non-minority male-owned
firms, employees at Native Hawaiian- and Other Pacific Islander-owned
firms earned $1.10--slightly above par with non-minority male-owned
firms.
Table 5. Disparity Ratios from the 2012 Survey of Business Owners, United States, Professional Services
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Sales and Employer Sales and Employees Payroll
Firms Receipts Firms Receipts ------------- ($000s)
------------- ($000s) ------------- ($000s) ---------------
----------------- ----------------- (5)
(1) (2) (3) (4) (6)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Panel A. Levels....................................................................................................--------------------------------------------------------------------------------------------------------------------------------------------------------
All Firms...................................................... 3,868,657 877,237,881 748,444 742,626,210 4,652,991 277,172,802
Non-minority male.............................................. 1,835,748 587,306,112 441,573 513,381,557 3,050,082 192,887,690
African American............................................... 206,942 15,682,967 13,822 11,281,769 81,170 4,457,109
Hispanic....................................................... 278,066 33,525,181 29,582 25,584,292 170,953 8,857,606
Asian.......................................................... 276,960 67,766,453 50,834 58,666,210 345,376 23,067,037
Native Hawaiian/Pac. Islander.................................. 6,292 931,973 600 764,525 3,680 255,342
Am. Indian & Alaska Native..................................... 30,966 3,168,244 3,627 2,193,127 17,882 787,037
Female......................................................... 1,334,561 138,669,937 165,437 102,552,393 774,717 38,060,358
--------------------------------------------------------------------------------------------------------------------------------------------------------
Panel B. Column Percentages...............................................................................................--------------------------------------------------------------------------------------------------------------------------------------------------------
All Firms...................................................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Non-minority male.............................................. 47.45% 66.95% 59.00% 69.13% 65.55% 69.59%
African American............................................... 5.35% 1.79% 1.85% 1.52% 1.74% 1.61%
Hispanic....................................................... 7.19% 3.82% 3.95% 3.45% 3.67% 3.20%
Asian.......................................................... 7.16% 7.72% 6.79% 7.90% 7.42% 8.32%
Native Hawaiian/Pac. Islander.................................. 0.16% 0.11% 0.08% 0.10% 0.08% 0.09%
Am. Indian & Alaska Native..................................... 0.80% 0.36% 0.48% 0.30% 0.38% 0.28%
Female......................................................... 34.50% 15.81% 22.10% 13.81% 16.65% 13.73%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Panel C. Disparity Ratios....................................................................................................--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-minority male...........................................................
African American............................................................
Hispanic....................................................................
Asian.......................................................................
Native Hawaiian/Pac. Islander............................................... 128.42 98.66 114.92
Am. Indian & Alaska Native..................................................
Female......................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source and Notes: See Table 6.
2. Results from the 2017 Annual Survey of Businesses
a. Economy-Wide Results
Turning now to the 2017 ABS, Table 6, below, presents results for
all industries combined (i.e. economy-wide) and for the United States
as a whole. Panel A summarizes the ABS results for each race and/or sex
group. For example, Panel A shows a total of 5.47 million employer
firms in the U.S. in 2017 (column 1) with overall sales and receipts of
$12.689 trillion (column 2). These 5.47 million firms had a total of
62.99 million employees (column 3) and a total annual payroll expense
of $2.618 trillion (column 4).
The remaining rows in Panel A provide comparable statistics for
non-minority male-owned, women-owned, and minority-owned firms. For
example, Table 6 shows that there were 124,004 African American-owned
employer firms counted in 2017, and that these 124,004 firms registered
$127.851 billion in sales and receipts. It also shows that these
African American-owned firms employed a total of 1.21 million workers
with an annual payroll total of $36.105 billion.
Panel B in Table 6 converts the figures in Panel A to percentage
distributions within each column. For example, Column (1) in Panel B of
Table 6 shows that African Americans owned just 2.27 percent of all
employer firms in the U.S. and women owned just 15.62 percent.
Additionally, 5.88 percent of employer firms were Hispanic-owned, 10.15
percent were Asian-owned, 0.45 percent were American Indian- and Alaska
Native-owned, and 0.13 percent were Native Hawaiian- and Other Pacific
Islander-owned.
Column (2) in Panel B provides the same percentage distribution for
overall sales and receipts for employer firms. Table 6, for example,
shows that non-minority males owned 52.08 percent of all employer firms
and earned 70.71 percent of all sales and receipts. In contrast:
Although African Americans owned 2.27 percent of all
employer firms in the U.S. in 2017, they earned only 1.01 percent of
all sales and receipts.
Although Hispanics firms 5.88 percent of all employer
firms, they earned only 3.33 percent of all sales and receipts.
Although Asians owned 10.15 percent of all employer
firms, they earned only 6.42 percent of all sales and receipts.
Although American Indians and Alaska Natives owned 0.45
percent of all employer firms, they earned only 0.3 percent of all
sales and receipts.
Although Native Hawaiians and Other Pacific Islanders
owned 0.13 percent of all employer firms, they earned only 0.07 percent
of all sales and receipts.
Although women owned 15.62 percent of all employer firms,
they earned only 9.6 percent of all sales and receipts.
These disparities between the availability and utilization of
minority- and women-owned firms can be viewed directly from the
disparity indexes in Panel C of Table 6. For example, Panel C shows
that African American-owned employer firms in 2017 received just 44.48
percent of what would be expected based on their availability in the
market.\29\ Panel C shows as well that women-owned firms received just
61.44 percent of what would be expected based on their availability in
the market. For Hispanics, the figure was 56.6 percent. For Asians, the
figure was 63.27 percent. For American Indians and Alaska Natives, the
figure was 66.89 percent, and for Native Hawaiians and Other Pacific
Islanders, the figure was 53.09 percent. These disparities are all
large, adverse, and statistically significant.
---------------------------------------------------------------------------
\29\ The disparity index is derived by dividing the share of sales
and receipts from Panel B column (2) by the share of firms in Panel B
column (1) and multiplying the result by 100.
---------------------------------------------------------------------------
Another way to look at these disparities is by comparing sales and
receipts per firm. In Table 6, for example, average per firm sales and
receipts for non-minority male-owned employer firms was $3.15
million.\30\ In contrast:
---------------------------------------------------------------------------
\30\ Per firm sales and receipts is derived by dividing the sales
and receipts amount in Panel A column (2) by the number of employer
firms in Panel A column (1).
---------------------------------------------------------------------------
For African American-owned employer firms, average per
firm sales and receipts was $1.03 million. In other words, for every
dollar of sales and receipts earned by non-minority male-owned employer
firms, African American-owned employer firms received just 33 cents.
For Hispanic-owned employer firms, average per firm sales
and receipts was $1.31 million. In other words, for every dollar of
sales and receipts earned by non-minority male-owned employer firms,
Hispanic-owned employer firms received just 42 cents.
For Asian-owned employer firms, average per firm sales
and receipts was $1.47 million. In other words, for every dollar of
sales and receipts earned by non-minority male-owned employer firms,
Asian-owned employer firms received just 47 cents.
For American Indian- and Alaska Native-owned employer
firms, average per firm sales and receipts was $1.55 million. In other
words, for every dollar of sales and receipts earned by non-minority
male-owned employer firms, American Indian- and Alaska Native-owned
employer firms received just 49 cents.
For Native Hawaiian- and Other Pacific Islander-owned
employer firms, average per firm sales and receipts was $1.23 million.
In other words, for every dollar of sales and receipts earned by non-
minority male-owned employer firms, Native Hawaiian- and Other Pacific
Islander-owned employer firms received just 39 cents.
For women-owned employer firms, average per firm sales
and receipts was $1.42 million. In other words, for every dollar of
sales and receipts earned by non-minority male-owned employer firms,
women-owned employer firms received just 45 cents.
As discussed above, these severe disparities in firm earnings have
a direct negative and compounding effect on the employees of minority-
and women-owned firms. Table 6, for example, shows that average payroll
per employee at non-minority male-owned employer firms in 2017 was
$45,555.\31\ In contrast:
---------------------------------------------------------------------------
\31\ Average payroll per employee is derived by dividing total
payroll in Panel A column (4) by total number of employees in Panel A
column (3).
---------------------------------------------------------------------------
For African American-owned employers, average payroll per
employee was just $29,882. In other words, for every $1 in wages earned
by employees at non-minority male-owned firms, employees at African
American-owned firms earned just 66 cents.
For Hispanic-owned employers average payroll per employee
was just $31,674. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at Hispanic-owned
firms earned just 70 cents.
For Asian-owned employers average payroll per employee
was just $34,137. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at Asian-owned
firms earned just 75 cents.
For American Indian- and Alaska Native-owned employers
average payroll per employee was just $39,756. In other words, for
every $1 in wages earned by employees at non-minority male-owned firms,
employees at American Indian- and Alaska Native-owned firms earned just
87 cents.
For Native Hawaiian- and Other Pacific Islander-owned
employers it was just $35,386. In other words, for every $1 in wages
earned by employees at non-minority male-owned firms, employees at
Native Hawaiian- and Other Pacific Islander-owned firms earned just 78
cents.
For women-owned employers average payroll per employee
was just $36,926. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at women-owned
firms earned just 81 cents.
Table 6. Disparity Ratios from the 2017 Annual Business Survey, United States, All Industries
----------------------------------------------------------------------------------------------------------------
Employer Sales and Employees Payroll
Firms Receipts ------------- ($000s)
------------- ($000s) ---------------
----------------- (3)
(1) (2) (4)
----------------------------------------------------------------------------------------------------------------
Panel A. Levels.................................................................................................
----------------------------------------------------------------------------------------------------------------
All Firms............................................ 5,474,721 12,689,937,307 62,990,475 2,618,191,164
Non-minority male.................................... 2,851,098 8,972,454,223 38,973,541 1,775,434,267
African American..................................... 124,004 127,850,815 1,208,270 36,105,467
Hispanic............................................. 322,076 422,573,589 2,872,550 90,985,526
Asian................................................ 555,638 814,806,324 4,649,688 158,725,110
Native Hawaiian/Pac. Islander........................ 6,847 8,426,209 55,413 1,960,819
Am. Indian & Alaska Native........................... 24,503 37,992,217 221,193 8,793,842
Female............................................... 855,136 1,217,743,211 7,863,653 290,375,358
----------------------------------------------------------------------------------------------------------------
Panel B. Column Percentages.....................................................................................
----------------------------------------------------------------------------------------------------------------
All Firms............................................ 100.00% 100.00% 100.00% 100.00%
Non-minority male.................................... 52.08% 70.71% 61.87% 67.81%
African American..................................... 2.27% 1.01% 1.92% 1.38%
Hispanic............................................. 5.88% 3.33% 4.56% 3.48%
Asian................................................ 10.15% 6.42% 7.38% 6.06%
Native Hawaiian/Pac. Islander........................ 0.13% 0.07% 0.09% 0.07%
Am. Indian & Alaska Native........................... 0.45% 0.30% 0.35% 0.34%
Female............................................... 15.62% 9.60% 12.48% 11.09%
----------------------------------------------------------------------------------------------------------------
Panel C. Disparity Ratios (2) vs. (1) (3) vs. (1) (4) vs. (1)
----------------------------------------------------------------------------------------------------------------
Non-minority male.................................................
African American..................................................
Hispanic..........................................................
Asian.............................................................
Native Hawaiian/Pac. Islander.....................................
Am. Indian & Alaska Native........................................
Female............................................................
----------------------------------------------------------------------------------------------------------------
Source: Authors calculations from the 2017 ABS. Notes: (1) Figures are rounded. Rounding was performed
subsequent to any mathematical calculations; (2) Excludes publicly owned, foreign-owned, and not-for-profit
firms; (3) Totals for ``All Firms'' includes firms that were equally nonminority-minority owned; (4)
Statistically significant; disparity indexes are italicized; (5) ``n/a'' indicates that data were not
disclosed due to confidentiality or other publication restrictions.
b. Results for the Construction Sector
Table 7 provides comparable 2017 information for the construction
sector, which, along with architecture, engineering, and related
professional services, is a major recipient of Federal surface and
aviation transportation funding.
Although non-minority males owned 68.52 percent of all employer
firms in the construction sector, they earned 77.92 percent of all
sales and receipts. In contrast:
Although African Americans owned 1.17 percent of all
employer firms in the U.S. in 2017, they earned only 0.72 percent of
all sales and receipts. This yields a disparity index of 61.05.
Although Hispanics owned 7.16 percent of all employer
firms in the U.S. in 2017, they earned only 4.1 percent of all sales
and receipts. This yields a disparity index of 57.26.
Although Asians owned 2.02 percent of all employer firms
in the U.S. in 2017, they earned only 1.37 percent of all sales and
receipts. This yields a disparity index of 67.73.
Although Native Hawaiians and Other Pacific Islanders
owned 0.16 percent of all employer firms in the U.S. in 2017, they
earned only 0.1 percent of all sales and receipts. This yields a
disparity index of 62.97.
Although American Indians and Alaska Natives owned 0.69
percent of all employer firms in the U.S. in 2017, they earned only
0.52 percent of all sales and receipts. This yields a disparity index
of 76.15.
As a group, women fared much better in construction in 2017
compared to other disadvantaged groups. Women owned 7.15 percent of all
employer firms in the U.S. in 2017, and they earned an equivalent share
of sales and receipts--7.26 percent, yielding no adverse disparity
index. But remember, this new ABS data does not include emerging firms
that have yet grown sufficiently large to hire employees.
When we consider per firm sales and receipts for employer firms in
2017, we see that non-minority male-owned firms averaged $2.51 million.
In contrast:
For African American-owned employer firms, average per
firm sales and receipts was 1.35 million. In other words, for every
dollar of sales and receipts earned by non-minority male-owned employer
firms, African American-owned employer firms received just 54 cents.
For Hispanic-owned employer firms, average per firm sales
and receipts was 1.26 million. In other words, for every dollar of
sales and receipts earned by non-minority male-owned employer firms,
Hispanic-owned employer firms received just 50 cents.
For Asian-owned employer firms, average per firm sales
and receipts was 1.49 million. In other words, for every dollar of
sales and receipts earned by non-minority male-owned employer firms,
Asian-owned employer firms received just 60 cents.
For American Indian- and Alaska Native-owned employer
firms, average per firm sales and receipts was 1.68 million. In other
words, for every dollar of sales and receipts earned by non-minority
male-owned employer firms, American Indian- and Alaska Native-owned
employer firms received just 67 cents.
For Native Hawaiian- and Other Pacific Islander-owned
employer firms, average per firm sales and receipts was 1.39 million.
In other words, for every dollar of sales and receipts earned by non-
minority male-owned employer firms, Native Hawaiian- and Other Pacific
Islander-owned employer firms received just 55 cents.
For women-owned employer firms, average per firm sales
and receipts was 2.24 million. In other words, for every dollar of
sales and receipts earned by non-minority male-owned employer firms,
women-owned employer firms received just 89 cents.
Considering the employees of these minority- and women-owned firms,
Table 7 shows that average payroll per employee at non-minority male-
owned employer firms the construction sector in 2017 was $54,984. In
contrast:
For African American-owned employers, average payroll per
employee was just $45,869. In other words, for every $1 in wages earned
by employees at non-minority male-owned firms, employees at African
American-owned firms earned just 83 cents.
For Hispanic-owned employers average payroll per employee
was just $41,881. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at Hispanic-owned
firms earned just 76 cents.
For Asian-owned employers average payroll per employee
was just $50,307. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at Asian-owned
firms earned 91 cents.
For American Indian- and Alaska Native-owned employers
average payroll per employee was just $51,723. In other words, for
every $1 in wages earned by employees at non-minority male-owned firms,
employees at American Indian- and Alaska Native-owned firms earned 94
cents.
For Native Hawaiian- and Other Pacific Islander-owned
employers it was just $46,120 male-owned firms, employees at Native
Hawaiian- and Other Pacific Islander-owned firms earned just 84 cents.
For women-owned employers average payroll per employee
was just $53,318. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at women-owned
firms earned 97 cents.
Table 7. Disparity Ratios from the 2017 Annual Business Survey, United States, Construction
----------------------------------------------------------------------------------------------------------------
Employer Sales and Employees Payroll
Firms Receipts ------------- ($000s)
------------- ($000s) ---------------
----------------- (5)
(3) (4) (6)
----------------------------------------------------------------------------------------------------------------
Panel A. Levels.................................................................................................
----------------------------------------------------------------------------------------------------------------
All Firms............................................ 700,453 1,544,490,456 6,120,046 324,999,296
Non-minority male.................................... 479,971 1,203,446,334 4,504,618 247,682,903
African American..................................... 8,218 11,062,034 54,093 2,481,191
Hispanic............................................. 50,187 63,362,420 327,799 13,728,565
Asian................................................ 14,169 21,160,223 82,746 4,162,689
Native Hawaiian/Pac. Islander........................ 1,093 1,517,730 7,795 359,508
Am. Indian & Alaska Native........................... 4,821 8,095,145 35,355 1,828,684
Female............................................... 50,075 112,156,157 508,141 27,092,808
----------------------------------------------------------------------------------------------------------------
Panel B. Column Percentages.....................................................................................
----------------------------------------------------------------------------------------------------------------
All Firms............................................ 100.00% 100.00% 100.00% 100.00%
Non-minority male.................................... 68.52% 77.92% 73.60% 76.21%
African American..................................... 1.17% 0.72% 0.88% 0.76%
Hispanic............................................. 7.16% 4.10% 5.36% 4.22%
Asian................................................ 2.02% 1.37% 1.35% 1.28%
Native Hawaiian/Pac. Islander........................ 0.16% 0.10% 0.13% 0.11%
Am. Indian & Alaska Native........................... 0.69% 0.52% 0.58% 0.56%
Female............................................... 7.15% 7.26% 8.30% 8.34%
----------------------------------------------------------------------------------------------------------------
Panel C. Disparity Ratios (2) vs. (1) (3) vs. (1) (4) vs. (1)
----------------------------------------------------------------------------------------------------------------
Non-minority male.................................................
African American..................................................
Hispanic..........................................................
Asian.............................................................
Native Hawaiian/Pac. Islander.....................................
Am. Indian & Alaska Native........................................
Female............................................................ 101.58 116.14 116.61
----------------------------------------------------------------------------------------------------------------
Source and Notes: See Table 6.
c. Results for the Professional, Scientific, and Technical
Sector
Table 8 provides comparable 2017 information for the professional,
scientific, and technical sector (which includes architecture,
engineering, and related professional services). This sector, along
with construction, is a major recipient of Federal surface and aviation
transportation funding.
Although non-minority males owned 56.31 percent of all employer
firms in the construction sector, they earned 66.39 percent of all
sales and receipts. In contrast:
Although African Americans owned 2.06 percent of all
employer firms in the U.S. in 2017, they earned only 1.6 percent of all
sales and receipts. This yields a disparity index of 77.65.
Although Hispanics owned 4.32 percent of all employer
firms in the U.S. in 2017, they earned only 3.2 percent of all sales
and receipts. This yields a disparity index of 74.09.
Although Asians owned 7.67 percent of all employer firms
in the U.S. in 2017, they earned only 8.84 percent of all sales and
receipts. This yields a disparity index of 115.31.
Although Native Hawaiians and Other Pacific Islanders
owned 0.12 percent of all employer firms in the U.S. in 2017, they
earned only 0.1 percent of all sales and receipts. This yields a
disparity index of 84.87.
Although American Indians and Alaska Natives owned 0.52
percent of all employer firms in the U.S. in 2017, they earned only
0.52 percent of all sales and receipts. This yields a disparity index
of 99.76.
Although women owned 19.1 percent of all employer firms
in the U.S. in 2017, they earned only 12.4 percent of all sales and
receipts. This yields a disparity index of 64.91.
When we consider per firm sales and receipts for employer firms, we
see that non-minority male-owned firms averaged $1.37 million in 2017.
In contrast:
For African American-owned employer firms, average per
firm sales and receipts was $902 thousand. In other words, for every
dollar of sales and receipts earned by non-minority male-owned employer
firms, African American-owned employer firms received just 66 cents.
For Hispanic-owned employer firms, average per firm sales
and receipts was $861 thousand. In other words, for every dollar of
sales and receipts earned by non-minority male-owned employer firms,
Hispanic-owned employer firms received just 63 cents.
For Asian-owned employer firms, average per firm sales
and receipts was $1.34 million. In other words, for every dollar of
sales and receipts earned by non-minority male-owned employer firms,
Asian-owned employer firms received just 98 cents.
For Native Hawaiian- and Other Pacific Islander-owned
employer firms, average per firm sales and receipts was $986 thousand.
In other words, for every dollar of sales and receipts earned by non-
minority male-owned employer firms, Native Hawaiian- and Other Pacific
Islander-owned employer firms received just 72 cents.
For American Indian- and Alaska Native-owned employer
firms, average per firm sales and receipts was $1.16 million. In other
words, for every dollar of sales and receipts earned by non-minority
male-owned employer firms, American Indian- and Alaska Native-owned
employer firms received just 85 cents.
For women-owned employer firms, average per firm sales
and receipts was $754 thousand. In other words, for every dollar of
sales and receipts earned by non-minority male-owned employer firms,
women-owned employer firms received just 55 cents.
Considering the employees of these minority- and women-owned firms,
Table 8 shows that average payroll per employee at non-minority male-
owned employer firms the professional services sector in 2017 was
$70,546. In contrast:
For African American-owned employers, average payroll per
employee was just $59,033. In other words, for every $1 in wages earned
by employees at non-minority male-owned firms, employees at African
American-owned firms earned just 84 cents.
For Hispanic-owned employers average payroll per employee
was just $56,567. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at Hispanic-owned
firms earned just 80 cents.
For Asian-owned employers average payroll per employee
was $75,179--somewhat higher than non-minority male-owned employers.
Thus, for every $1 in wages earned by employees at non-minority male-
owned firms, employees at Asian-owned firms earned $1.07 cents,
slightly better than parity.
For American Indian- and Alaska Native-owned employers
average payroll per employee was just $60,884. In other words, for
every $1 in wages earned by employees at non-minority male-owned firms,
employees at American Indian- and Alaska Native-owned firms earned 86
cents.
For Native Hawaiian- and Other Pacific Islander-owned
employers it was just $63,009 male-owned firms, employees at Native
Hawaiian- and Other Pacific Islander-owned firms earned just 89 cents.
For women-owned employers average payroll per employee
was just $55,606. In other words, for every $1 in wages earned by
employees at non-minority male-owned firms, employees at women-owned
firms earned 79 cents.
Table 8. Disparity Ratios from the 2017 Annual Business Survey, United States,PProfessional, Scientific, and
Technical Services
----------------------------------------------------------------------------------------------------------------
Employer Sales and Employees Payroll
Firms Receipts ------------- ($000s)
------------- ($000s) ---------------
----------------- (5)
(3) (4) (6)
----------------------------------------------------------------------------------------------------------------
Panel A. Levels.................................................................................................
----------------------------------------------------------------------------------------------------------------
All Firms............................................ 794,235 922,698,077 5,339,009 362,594,623
Non-minority male.................................... 447,254 612,610,502 3,281,827 231,520,629
African American..................................... 16,392 14,787,229 96,267 5,682,935
Hispanic............................................. 34,292 29,514,634 185,395 10,487,211
Asian................................................ 60,907 81,592,941 432,567 32,520,040
Native Hawaiian/Pac. Islander........................ 971 957,403 6,118 385,489
Am. Indian & Alaska Native........................... 4,142 4,800,227 29,953 1,823,661
Female............................................... 151,694 114,396,323 751,207 41,771,294
----------------------------------------------------------------------------------------------------------------
Panel B. Column Percentages.....................................................................................
----------------------------------------------------------------------------------------------------------------
All Firms............................................ 100.00% 100.00% 100.00% 100.00%
Non-minority male.................................... 56.31% 66.39% 61.47% 63.85%
African American..................................... 2.06% 1.60% 1.80% 1.57%
Hispanic............................................. 4.32% 3.20% 3.47% 2.89%
Asian................................................ 7.67% 8.84% 8.10% 8.97%
Native Hawaiian/Pac. Islander........................ 0.12% 0.10% 0.11% 0.11%
Am. Indian & Alaska Native........................... 0.52% 0.52% 0.56% 0.50%
Female............................................... 19.10% 12.40% 14.07% 11.52%
----------------------------------------------------------------------------------------------------------------
Panel C. Disparity Ratios (2) vs. (1) (3) vs. (1) (4) vs. (1)
----------------------------------------------------------------------------------------------------------------
Non-minority male.................................................
African American..................................................
Hispanic..........................................................
Asian.............................................................
Native Hawaiian/Pac. Islander..................................... 84.87 93.73 86.96
Am. Indian & Alaska Native........................................ 99.76 107.58 96.44
Female............................................................
----------------------------------------------------------------------------------------------------------------
Source and Notes: See Table 6.
3. State-Level Results from 2002-2017
The state-level disparities observed in the 2017 ABS are documented
below in Appendix A, Tables A.1 through A.18. Data from the 2012 SBO is
presented in Appendix B, Tables B.1 through B.18. Data from the 2007
SBO is presented in Appendix C, Tables C.1 through C.18. Data from the
2002 SBO is presented in Appendix D, Tables D.1 through D.18.
The most noticeable aspect of the statistics presented in Tables
A.1 through D.18 below is how many of the disparity indexes are large,
adverse, and statistically significant.\32\ This is true for African
Americans, Hispanics, Asians and Pacific Islanders, American Indians
and Alaska Natives, and non-minority women. It is true in the
construction sector, it is true in the professional services sector,
and it is true when considering all industries combined. It is true in
all 50 states and the District of Columbia. While there is certainly
variation by race, sex, industry, geography, and time, the similarities
vastly outweigh the differences. Table 9 provides a high-level summary
of the findings of disparity from the 2007 SBO in Tables A.1 through
A.18.
---------------------------------------------------------------------------
\32\ I have measured statistical significance here using the ``two
standard deviation'' or ``5%'' level of significance typically used in
disparate impact litigation in employment and related areas.
Table 9. Prevalence of Disparities in the 2017 Annual Business Survey and the 2012, 2007 & 2002 Survey of Business Owners
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fraction of Fraction of
Disparity Disparity Fraction of
Number of Indexes Indexes Disparity
Year Industry Disparity Race/Sex Group Less than Less than Indexes that
Indexes in or Equal to or Equal to are
Table 80 100 Statistically
Significant
--------------------------------------------------------------------------------------------------------------------------------------------------------
2017.................................... All Industries............. 48 AfrAmer.................... 98% 100% 88%
2012.................................... All Industries............. 96 AfrAmer.................... 97% 98% 92%
2007.................................... All Industries............. 96 AfrAmer.................... 93% 97% 90%
2002.................................... All Industries............. 100 AfrAmer.................... 98% 100% 98%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... Construction............... 39 AfrAmer.................... 77% 82% 46%
2012.................................... Construction............... 84 AfrAmer.................... 88% 93% 80%
2007.................................... Construction............... 84 AfrAmer.................... 85% 90% 82%
2002.................................... Construction............... 69 AfrAmer.................... 86% 88% 72%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... Professional Services...... 41 AfrAmer.................... 73% 80% 49%
2012.................................... Professional Services...... 92 AfrAmer.................... 78% 90% 70%
2007.................................... Professional Services...... 92 AfrAmer.................... 76% 88% 73%
2002.................................... Professional Services...... 86 AfrAmer.................... 94% 98% 80%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... All Industries............. 52 Hispanic................... 87% 94% 79%
2012.................................... All Industries............. 101 Hispanic................... 87% 94% 84%
2007.................................... All Industries............. 101 Hispanic................... 82% 90% 86%
2002.................................... All Industries............. 102 Hispanic................... 100% 100% 100%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... Construction............... 49 Hispanic................... 86% 92% 61%
2012.................................... Construction............... 95 Hispanic................... 89% 96% 79%
2007.................................... Construction............... 95 Hispanic................... 87% 93% 78%
2002.................................... Construction............... 85 Hispanic................... 88% 91% 81%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... Professional Services...... 48 Hispanic................... 42% 65% 29%
2012.................................... Professional Services...... 97 Hispanic................... 63% 79% 54%
2007.................................... Professional Services...... 97 Hispanic................... 65% 75% 57%
2002.................................... Professional Services...... 84 Hispanic................... 93% 94% 74%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... All Industries............. 52 Asian...................... 98% 98% 96%
2012.................................... All Industries............. 104 Asian...................... 68% 89% 73%
2007.................................... All Industries............. 104 Asian...................... 75% 96% 80%
2002.................................... All Industries............. 102 Asian...................... 100% 100% 100%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... Construction............... 40 Asian...................... 72% 75% 38%
2012.................................... Construction............... 84 Asian...................... 70% 75% 57%
2007.................................... Construction............... 84 Asian...................... 71% 77% 54%
2002.................................... Construction............... 58 Asian...................... 74% 90% 53%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... Professional Services...... 49 Asian...................... 14% 29% 16%
2012.................................... Professional Services...... 100 Asian...................... 21% 33% 34%
2007.................................... Professional Services...... 100 Asian...................... 15% 28% 32%
2002.................................... Professional Services...... 88 Asian...................... 64% 77% 51%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... All Industries............. 36 NHPI....................... 81% 86% 58%
2012.................................... All Industries............. 71 NHPI....................... 86% 86% 70%
2007.................................... All Industries............. 71 NHPI....................... 86% 93% 72%
2002.................................... All Industries............. 48 NHPI....................... 100% 100% 96%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... Construction............... 11 NHPI....................... 73% 73% 45%
2012.................................... Construction............... 33 NHPI....................... 76% 79% 74%
2007.................................... Construction............... 33 NHPI....................... 73% 79% 58%
2002.................................... Construction............... 10 NHPI....................... 70% 80% 50%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... Professional Services...... 13 NHPI....................... 69% 77% 46%
2012.................................... Professional Services...... 31 NHPI....................... 68% 75% 73%
2007.................................... Professional Services...... 31 NHPI....................... 52% 58% 39%
2002.................................... Professional Services...... 13 NHPI....................... 92% 92% 85%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... All Industries............. 49 AIAN....................... 76% 88% 55%
2012.................................... All Industries............. 94 AIAN....................... 89% 97% 82%
2007.................................... All Industries............. 94 AIAN....................... 91% 98% 82%
2002.................................... All Industries............. 96 AIAN....................... 99% 99% 98%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... Construction............... 39 AIAN....................... 59% 72% 23%
2012.................................... Construction............... 74 AIAN....................... 72% 81% 53%
2007.................................... Construction............... 74 AIAN....................... 73% 85% 54%
2002.................................... Construction............... 74 AIAN....................... 81% 91% 64%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... Professional Services...... 33 AIAN....................... 52% 67% 27%
2012.................................... Professional Services...... 79 AIAN....................... 79% 92% 51%
2007.................................... Professional Services...... 79 AIAN....................... 68% 80% 43%
2002.................................... Professional Services...... 71 AIAN....................... 90% 92% 76%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... All Industries............. 52 NMF........................ 100% 100% 98%
2012.................................... All Industries............. 104 NMF........................ 98% 99% 98%
2007.................................... All Industries............. 104 NMF........................ 98% 100% 100%
2002.................................... All Industries............. 104 NMF........................ 100% 100% 100%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... Construction............... 52 NMF........................ 21% 54% 2%
2012.................................... Construction............... 103 NMF........................ 30% 56% 16%
2007.................................... Construction............... 103 NMF........................ 36% 67% 23%
2002.................................... Construction............... 42 NMF........................ 71% 86% 50%
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
2017.................................... Professional Services...... 52 NMF........................ 92% 100% 83%
2012.................................... Professional Services...... 103 NMF........................ 97% 100% 94%
2007.................................... Professional Services...... 103 NMF........................ 99% 99% 94%
2002.................................... Professional Services...... 54 NMF........................ 100% 100% 98%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Author's calculations from the 2017 ABS, and the 2012, 2007 and 2002 SBO. Note: ``NHPI'' stands for Native Hawaiians and Other Pacific
Islanders, ``AIAN'' stands for American Indians and Alaska Natives, and ``NMF'' stands for non-minority female.
a. Conclusions from the Survey of Business Owners/Annual
Business Survey Data
While the exact proportions vary, large and statistically
significant disparities are observed in the U.S. as a whole, in all 50
states and the District of Columbia, for all minority groups--African
Americans, Hispanics, Asians and Pacific Islanders, and American
Indians and Alaska Natives--as well as for non-minority women. These
disparities are found in the Construction sector, the Professional,
Scientific and Technical Services Sector (which includes Architecture,
Engineering and related industries), and in the economy as a whole.
D. There is Strong Evidence of Disparities and Discrimination in
Minority and Female Business Formation Rates and Earnings
It is fair to ask whether the disparities documented in most
disparity studies and in the SBO and ABS data result primarily from
discrimination, or whether they result from other, potentially non-
discriminatory, factors.
This question can be tested directly using the American Community
Survey 5-year Public Use Microdata Sample (ACS PUMS), which allows us
to examine business outcomes for different race, ethnic, and gender
groups in great detail while holding constant a wide variety of other
demographic and economic variables.
1. Discrimination Impacting Business Formation
a. Methods
To assess the extent of discrimination in business formation, I
developed three different statistical regression models.\33\ In ``Model
A'', the only independent variables included in the analysis are
indicators for race and sex and survey year. This model identifies the
raw differences in business formation rates between minorities, women,
and non-minority males, holding only time constant.
---------------------------------------------------------------------------
\33\ Regression analysis is a type of statistical analysis that
examines the correlation between two variables (``regression'') or
three or more variables (``multiple regression'' or ``multivariate
regression'') in a mathematical model by determining the line of best
fit through a series of data points. In simpler terms, regression
analysis is a statistical technique allowing the comparison between
certain business outcomes, such as business formation, business
earnings, or loan denials, and minority or female status, while holding
other, potentially non-discriminatory factors, such as geographic
location, industry affiliation, education, age, or balance sheets,
constant.
---------------------------------------------------------------------------
Next, ``Model B'' adds to the regression equation several
independent variables that are indicators of qualifications and
capacity, including schooling, state of residence, and age.\34\ This
allows us to compare individuals that are similarly situated in terms
of their educational attainment, their geographic location, and their
labor market experience.
---------------------------------------------------------------------------
\34\ A person's age is a widely used proxy for their labor market
experience and enters the regression equation quadratically.
---------------------------------------------------------------------------
Finally, ``Model C'' adds to the regression equation a large number
of independent variables that have been shown to be related to the
propensity to become a business owner. These include proxies for
individual financial assets (interest and dividend income, home
ownership status, and home property value), family structure (spouse
present in the household, number of children in the household),
mobility (lived in the same house last year), immigration status
(foreign born, years in the U.S., English proficiency), military status
(veteran), and local macroeconomic conditions by state (general
population level, unemployment rate, number of full-time government
employees, per capita personal income).\35\
---------------------------------------------------------------------------
\35\ Interest and dividend income and per capita personal income
are included in the model in their logarithmic forms.
---------------------------------------------------------------------------
Taken together, these three models allow us to test whether
discrimination is the primary explanation for observed business
disparities for minorities and women. If disparity indexes remain
adverse, large, and statistically significant throughout Models A, B
and C, then the answer is ``Yes.''
b. Data
The data used for the analyses in this section are the most recent
2014-2018 American Community Survey 5-year Public Use Microdata Sample
(ACS), which allows us to examine business outcomes for different race,
ethnic, and gender groups in great detail while holding constant a wide
variety of other demographic and economic variables.\36\
---------------------------------------------------------------------------
\36\ These ACS data were released in January 2020. See U.S. Census
Bureau (2020d).
---------------------------------------------------------------------------
The analyses undertaken in this section require individual-level
data (i.e., ``microdata'') with relevant information on business
ownership status and other key socioeconomic characteristics. The
American Community Survey is an ongoing annual survey covering the same
type of information that was formerly collected in the decennial census
``long form.'' The ACS is sent to approximately 3.5 million addresses
annually, including housing units in all counties in the 50 states and
the District of Columbia.\37\ The PUMS file from the ACS contains
records for a subsample of the full ACS. The data used here are the
multi-year estimates combining the 2014 through 2018 ACS PUMS records.
The combined file contains over six million person-level records. The
2014-2018 ACS PUMS provides the full range of population and housing
information collected in the annual ACS and in the decennial census.
Business ownership status is identified in the ACS PUMS through the
``class of worker'' variable, which distinguishes the unincorporated
and incorporated self-employed from others in the labor force. The
presence of the class of worker variable allows us to construct a
detailed cross-sectional sample of individual business owners and their
associated earnings. The ACS PUMS universe for all of the analyses
presented below includes all prime age (16-64) private sector labor
force participants.
---------------------------------------------------------------------------
\37\ U.S. Census Bureau (2013).
---------------------------------------------------------------------------
c. Economy-Wide Findings
I estimated Models A, B and C across four different industry
groupings in the U.S.: (1) the entire economy, (2) the construction
sector, and (3) the Architecture/Engineering sector. These results are
reported below in Tables 10-12.
For the economy as a whole, the results are presented in Table 10.
Model A identifies large, adverse, and statistically significant
disparities in business formation rates in 2014-2018 for all minority
groups and for women. The results for Model A show:
For African Americans, the observed self-employment rate
is 5.7 percent and the model predicts that it would be 6.7 percentage
points higher--12.5 percent--if African Americans faced the same market
outcomes as non-minority males. This yields a disparity index of 46.
For Hispanics, the observed self-employment rate is 9.2
percent and the model predicts that it would be 3.8 percentage points
higher--13 percent--if Hispanics faced the same market outcomes as non-
minority males. This yields a disparity index of 70.9.
For Asian and Pacific Islanders, the observed self-
employment rate is 10 percent and the model predicts that it would be 3
percentage points higher--13 percent--if Asian and Pacific Islanders
faced the same market outcomes as non-minority males. This yields a
disparity index of 76.8.
For American Indians and Alaska Natives, the observed
self-employment rate is 8.7 percent and the model predicts that it
would be 3.7 percentage points higher--12.4 percent--if American
Indians and Alaska Natives faced the same market outcomes as non-
minority males. This yields a disparity index of 70.3.
For minorities as a group, the observed self-employment
rate is 8.3 percent and the model predicts that it would be 4.8
percentage points higher--13.1 percent--if minorities as a group faced
the same market outcomes as non-minority males. This yields a disparity
index of 63.2.
For non-minority females, the observed self-employment
rate is 9 percent and the model predicts that it would be 4 percentage
points higher--13 percent--if non-minority females faced the same
market outcomes as non-minority males. This yields a disparity index of
69.1.
For minorities and women as a group, the observed self-employment
rate is 8.6 percent and the model predicts that it would be 4.9
percentage points higher--13.4 percent--if minorities and women as a
group faced the same market outcomes as non-minority males. This yields
a disparity index of 63.7.Despite the addition of important
qualifications and capacity variables, the results for Model B show
that, for the economy as a whole, disparities in business formation
rates remain large, adverse, and statistically significant even when we
compare individuals that are similarly situated in terms of their
educational attainment, their geographic location, and their labor
market experience. Specifically, the results for Model B show:
For African Americans, the observed self-employment rate
is 5.7 percent and the model predicts that it would be 5.9 percentage
points higher--11.6 percent--if African Americans faced the same market
outcomes as non-minority males. This yields a disparity index of 49.5.
For Hispanics, the observed self-employment rate is 9.2
percent and the model predicts that it would be 3.3 percentage points
higher--12.5 percent--if Hispanics faced the same market outcomes as
non-minority males. This yields a disparity index of 73.9.
For Asian and Pacific Islanders, the observed self-
employment rate is 10 percent and the model predicts that it would be
3.2 percentage points higher--13.1 percent--if Asian and Pacific
Islanders faced the same market outcomes as non-minority males. This
yields a disparity index of 75.9.
For American Indians and Alaska Natives, the observed
self-employment rate is 8.7 percent and the model predicts that it
would be 3.5 percentage points higher--12.2 percent--if American
Indians and Alaska Natives faced the same market outcomes as non-
minority males. This yields a disparity index of 71.4.
For minorities as a group, the observed self-employment
rate is 9 percent and the model predicts that it would be 3.6
percentage points higher--12.5 percent--if minorities as a group faced
the same market outcomes as non-minority males. This yields a disparity
index of 71.6.
For non-minority females, the observed self-employment
rate is 8.3 percent and the model predicts that it would be 4.3
percentage points higher--12.6 percent--if non-minority females faced
the same market outcomes as non-minority males. This yields a disparity
index of 65.7.
For minorities and women as a group, the observed self-
employment rate is 8.6 percent and the model predicts that it would be
4.3 percentage points higher--12.9 percent--if minorities and women as
a group faced the same market outcomes as non-minority males. This
yields a disparity index of 66.5.
In Model C, numerous additional variables are included that measure
individual financial assets, family structure, mobility, immigration
status, military status, and local macroeconomic conditions. Despite
the inclusion of all these additional explanatory variables, the
results still show that disparities in business formation rates remain
large, adverse, and statistically significant when we compare
individuals who are also similarly situated in terms of these
additional measures. The specific results for Model C show:
For African Americans, the observed self-employment rate
is 5.7 percent and the model predicts that it would be 5.4 percentage
points higher--11.2 percent--if African Americans faced the same market
outcomes as non-minority males. This yields a disparity index of 51.5.
For Hispanics, the observed self-employment rate is 9.2
percent and the model predicts that it would be 4.3 percentage points
higher--13.5 percent--if Hispanics faced the same market outcomes as
non-minority males. This yields a disparity index of 68.4.
For Asian and Pacific Islanders, the observed self-
employment rate is 10 percent and the model predicts that it would be 5
percentage points higher--14.9 percent--if Asian and Pacific Islanders
faced the same market outcomes as non-minority males. This yields a
disparity index of 66.7.
For American Indians and Alaska Natives, the observed
self-employment rate is 8.7 percent and the model predicts that it
would be 3.2 percentage points higher--11.9 percent--if American
Indians and Alaska Natives faced the same market outcomes as non-
minority males. This yields a disparity index of 73.3.
For minorities as a group, the observed self-employment
rate is 9 percent and the model predicts that it would be 3.5
percentage points higher--12.4 percent--if minorities as a group faced
the same market outcomes as non-minority males. This yields a disparity
index of 72.1.
For non-minority females, the observed self-employment
rate is 8.3 percent and the model predicts that it would be 5.1
percentage points higher--13.4 percent--if non-minority females faced
the same market outcomes as non-minority males. This yields a disparity
index of 61.9.
For minorities and women as a group, the observed self-
employment rate is 8.6 percent and the model predicts that it would be
4.5 percentage points higher--13.1 percent--if minorities and women as
a group faced the same market outcomes as non-minority males. This
yields a disparity index of 65.6.
Table 10. Actual and Potential Minority and Female Business Formation
Rates, 2014-2018, All Industries
------------------------------------------------------------------------
Current Expected Disparity
Business Business Index
Formation Formation -----------
Race, Location Rate (%) Rate (%)
------------------------ (3)
(1) (2)
------------------------------------------------------------------------
Regression Model A......................................................
------------------------------------------------------------------------
African American.................... 5.74 12.48
Hispanic............................ 9.21 12.99
Asian and Pacific Islander.......... 9.96 12.97
American Indian and Alaska Native... 8.70 12.38
Two or More Races................... 8.87 12.66
Minority............................ 8.27 13.08
Non-minority female................. 8.95 12.96
DBE................................. 8.56 13.44
Non-minority male................... 13.09
------------------------------------------------------------------------
Regression Model B......................................................
------------------------------------------------------------------------
African American.................... 5.74 11.60
Hispanic............................ 9.21 12.46
Asian and Pacific Islander.......... 9.96 13.12
American Indian and Alaska Native... 8.70 12.18
Two or More Races................... 8.87 11.06
Minority............................ 8.27 12.58
Non-minority female................. 8.95 12.50
DBE................................. 8.56 12.87
Non-minority male................... 13.09
------------------------------------------------------------------------
Regression Model C......................................................
------------------------------------------------------------------------
African American.................... 5.74 11.15
Hispanic............................ 9.21 13.46
Asian and Pacific Islander.......... 9.96 14.93
American Indian and Alaska Native... 8.70 11.87
Two or More Races................... 8.87 11.06
Minority............................ 8.27 13.35
Non-minority female................. 8.95 12.41
DBE................................. 8.56 13.05
Non-minority male................... 13.09
------------------------------------------------------------------------
Source and Notes: Calculations by the author from the 2014-2018 ACS
PUMS. Disparity Indexes in italics are statistically significant at a
95 percent probability level or better.
d. Findings for Construction
When the scope of the inquiry is limited to just the construction
industries, the results appear in Table 11. When we examine just the
construction industry, Model A identifies large, adverse, and
statistically significant disparities in business formation rates in
2014-2018 for all minority groups and for women. The results for Model
A show:
For African Americans, the observed self-employment rate
is 17.8 percent and the model predicts that it would be 8.9 percentage
points higher--26.6 percent--if African Americans faced the same market
outcomes as non-minority males. This yields a disparity index of 66.7.
For Hispanics, the observed self-employment rate is 17.9
percent and the model predicts that it would be 8.7 percentage points
higher--26.6 percent--if Hispanics faced the same market outcomes as
non-minority males. This yields a disparity index of 67.3.
For Asian and Pacific Islanders, the observed self-
employment rate is 23.6 percent and the model predicts that it would be
3.9 percentage points higher--27.5 percent--if Asian and Pacific
Islanders faced the same market outcomes as non-minority males. This
yields a disparity index of 85.9.
For American Indians and Alaska Natives, the observed
self-employment rate is 19.1 percent and the model predicts that it
would be 9.1 percentage points higher--28.2 percent--if American
Indians and Alaska Natives faced the same market outcomes as non-
minority males. This yields a disparity index of 67.9.
For minorities as a group, the observed self-employment
rate is 18.3 percent and the model predicts that it would be 8.5
percentage points higher--26.8 percent--if minorities as a group faced
the same market outcomes as non-minority males. This yields a disparity
index of 68.2.
For non-minority females, the observed self-employment
rate is 17.9 percent and the model predicts that it would be 9
percentage points higher--26.9 percent--if non-minority females faced
the same market outcomes as non-minority males. This yields a disparity
index of 66.5.
For minorities and women as a group, the observed self-
employment rate is 18.2 percent and the model predicts that it would be
8.9 percentage points higher--27.1 percent--if minorities and women as
a group faced the same market outcomes as non-minority males. This
yields a disparity index of 67.3.
Despite the addition of important qualifications and capacity
variables, the results for Model B show that, for the economy as a
whole, disparities in business formation rates remain large, adverse,
and statistically significant even when we compare individuals that are
similarly situated in terms of their educational attainment, their
geographic location, and their labor market experience. Specifically,
the results for Model B show:
For African Americans, the observed self-employment rate
is 17.8 percent and the model predicts that it would be 8.7 percentage
points higher--26.5 percent--if African Americans faced the same market
outcomes as non-minority males. This yields a disparity index of 67.2.
For Hispanics, the observed self-employment rate is 17.9
percent and the model predicts that it would be 5.6 percentage points
higher--23.5 percent--if Hispanics faced the same market outcomes as
non-minority males. This yields a disparity index of 76.1.
For Asian and Pacific Islanders, the observed self-
employment rate is 23.6 percent and the model predicts that it would be
2.9 percentage points higher--26.5 percent--if Asian and Pacific
Islanders faced the same market outcomes as non-minority males. This
yields a disparity index of 89.1.
For American Indians and Alaska Natives, the observed
self-employment rate is 19.1 percent and the model predicts that it
would be 7.9 percentage points higher--27 percent--if American Indians
and Alaska Natives faced the same market outcomes as non-minority
males. This yields a disparity index of 70.9.
For minorities as a group, the observed self-employment
rate is 17.9 percent and the model predicts that it would be 10
percentage points higher--27.9 percent--if minorities as a group faced
the same market outcomes as non-minority males. This yields a disparity
index of 64.1.
For non-minority females, the observed self-employment
rate is 18.3 percent and the model predicts that it would be 6.1
percentage points higher--24.3 percent--if non-minority females faced
the same market outcomes as non-minority males. This yields a disparity
index of 75.
For minorities and women as a group, the observed self-
employment rate is 18.2 percent and the model predicts that it would be
7.5 percentage points higher--25.7 percent--if minorities and women as
a group faced the same market outcomes as non-minority males. This
yields a disparity index of 71.
In Model C, numerous additional variables are included that measure
individual financial assets, family structure, mobility, immigration
status, military status, and local macroeconomic conditions. Despite
the inclusion of all these additional explanatory variables, the
results still show that disparities in business formation rates remain
large, adverse, and statistically significant when we compare
individuals who are also similarly situated in terms of these
additional measures. The specific results for Model C show:
For African Americans, the observed self-employment rate
is 17.8 percent and the model predicts that it would be 7.5 percentage
points higher--25.3 percent--if African Americans faced the same market
outcomes as non-minority males. This yields a disparity index of 70.4.
For Hispanics, the observed self-employment rate is 17.9
percent and the model predicts that it would be 9 percentage points
higher--26.9 percent--if Hispanics faced the same market outcomes as
non-minority males. This yields a disparity index of 66.5.
For Asian and Pacific Islanders, the observed self-
employment rate is 23.6 percent and the model predicts that it would be
6.8 percentage points higher--30.5 percent--if Asian and Pacific
Islanders faced the same market outcomes as non-minority males. This
yields a disparity index of 77.6.
For American Indians and Alaska Natives, the observed
self-employment rate is 19.1 percent and the model predicts that it
would be 7.9 percentage points higher--27.1 percent--if American
Indians and Alaska Natives faced the same market outcomes as non-
minority males. This yields a disparity index of 70.7.
For minorities as a group, the observed self-employment
rate is 17.9 percent and the model predicts that it would be 10.3
percentage points higher--28.2 percent--if minorities as a group faced
the same market outcomes as non-minority males. This yields a disparity
index of 63.4.
For non-minority females, the observed self-employment
rate is 18.3 percent and the model predicts that it would be 8.1
percentage points higher--26.4 percent--if non-minority females faced
the same market outcomes as non-minority males. This yields a disparity
index of 69.2.
For minorities and women as a group, the observed self-
employment rate is 18.2 percent and the model predicts that it would be
9.5 percentage points higher--27.7 percent--if minorities and women as
a group faced the same market outcomes as non-minority males. This
yields a disparity index of 65.8.
Table 11. Actual and Potential Minority Business and Female Formation
Rates, 2014-2018, Construction
------------------------------------------------------------------------
Current Expected Disparity
Business Business Index
Formation Formation -----------
Race, Location Rate (%) Rate (%)
------------------------ (3)
(1) (2)
------------------------------------------------------------------------
Regression Model A......................................................
------------------------------------------------------------------------
African American.................... 17.78 26.64
Hispanic............................ 17.90 26.58
Asian and Pacific Islander.......... 23.64 27.52
American Indian and Alaska Native... 19.13 28.19
Two or More Races................... 20.10 25.79
Minority............................ 18.25 26.77
Non-minority female................. 17.91 26.92
DBE................................. 18.20 27.06
Non-minority male................... 26.84
------------------------------------------------------------------------
Regression Model B......................................................
------------------------------------------------------------------------
African American.................... 17.78 26.47
Hispanic............................ 17.90 23.52
Asian and Pacific Islander.......... 23.64 26.53
American Indian and Alaska Native... 19.13 27.00
Two or More Races................... 20.10 22.43
Minority............................ 18.25 24.33
Non-minority female................. 17.91 27.92
DBE................................. 18.20 25.65
Non-minority male................... 26.84
------------------------------------------------------------------------
Regression Model C......................................................
------------------------------------------------------------------------
African American.................... 17.78 25.27
Hispanic............................ 17.90 26.90
Asian and Pacific Islander.......... 23.64 30.45
American Indian and Alaska Native... 19.13 27.06
Two or More Races................... 20.10 22.62
Minority............................ 18.25 28.24
Non-minority female................. 17.91 26.38
DBE................................. 18.20 27.65
Non-minority male................... 26.84
------------------------------------------------------------------------
Source and Notes: See Table 10.
e. Findings for Architecture/Engineering
When the scope of the inquiry is limited to just the Architecture/
Engineering industries, the results appear in Table 12. When we examine
just the Architecture/Engineering industries, Model A identifies large,
adverse, and statistically significant disparities in business
formation rates in 2014-2018 for all minority groups and for women. The
results for Model A show:
For African Americans, the observed self-employment rate
is 6.5 percent and the model predicts that it would be 5.2 percentage
points higher--11.8 percent--if African Americans faced the same market
outcomes as non-minority males. This yields a disparity index of 55.6.
For Hispanics, the observed self-employment rate is 8.4
percent and the model predicts that it would be 3.4 percentage points
higher--11.8 percent--if Hispanics faced the same market outcomes as
non-minority males. This yields a disparity index of 71.1.
For Asian and Pacific Islanders, the observed self-
employment rate is 6.5 percent and the model predicts that it would be
5.1 percentage points higher--11.5 percent--if Asian and Pacific
Islanders faced the same market outcomes as non-minority males. This
yields a disparity index of 55.9.
For American Indians and Alaska Natives, the observed
self-employment rate is 6.2 percent and the model predicts that it
would be 5.3 percentage points higher--11.5 percent--if American
Indians and Alaska Natives faced the same market outcomes as non-
minority males. This yields a disparity index of 53.7.
For minorities as a group, the observed self-employment
rate is 7.4 percent and the model predicts that it would be 4.5
percentage points higher--11.9 percent--if minorities as a group faced
the same market outcomes as non-minority males. This yields a disparity
index of 62.
For non-minority females, the observed self-employment
rate is 7.8 percent and the model predicts that it would be 4.2
percentage points higher--12 percent--if non-minority females faced the
same market outcomes as non-minority males. This yields a disparity
index of 65.4.
For minorities and women as a group, the observed self-
employment rate is 7.6 percent and the model predicts that it would be
4.7 percentage points higher--12.3 percent--if minorities and women as
a group faced the same market outcomes as non-minority males. This
yields a disparity index of 62.
Despite the addition of important qualifications and capacity
variables, the results for Model B show that, for the economy as a
whole, disparities in business formation rates remain large, adverse,
and statistically significant even when we compare individuals that are
similarly situated in terms of their educational attainment, their
geographic location, and their labor market experience. Specifically,
the results for Model B show:
For African Americans, the observed self-employment rate
is 6.5 percent and the model predicts that it would be 3.6 percentage
points higher--10.1 percent--if African Americans faced the same market
outcomes as non-minority males. This yields a disparity index of 64.6.
For Hispanics, the observed self-employment rate is 8.4
percent and the model predicts that it would be 1.6 percentage points
higher--9.9 percent--if Hispanics faced the same market outcomes as
non-minority males. This yields a disparity index of 84.4.
For Asian and Pacific Islanders, the observed self-
employment rate is 6.5 percent and the model predicts that it would be
4.4 percentage points higher--10.9 percent--if Asian and Pacific
Islanders faced the same market outcomes as non-minority males. This
yields a disparity index of 59.2.
For American Indians and Alaska Natives, the observed
self-employment rate is 6.2 percent and the model predicts that it
would be 4.4 percentage points higher--10.5 percent--if American
Indians and Alaska Natives faced the same market outcomes as non-
minority males. This yields a disparity index of 58.6.
For minorities as a group, the observed self-employment
rate is 7.8 percent and the model predicts that it would be 3.1
percentage points higher--11 percent--if minorities as a group faced
the same market outcomes as non-minority males. This yields a disparity
index of 71.4.
For non-minority females, the observed self-employment
rate is 7.4 percent and the model predicts that it would be 3.1
percentage points higher--10.5 percent--if non-minority females faced
the same market outcomes as non-minority males. This yields a disparity
index of 70.5.
For minorities and women as a group, the observed self-
employment rate is 7.6 percent and the model predicts that it would be
3.3 percentage points higher--10.9 percent--if minorities and women as
a group faced the same market outcomes as non-minority males. This
yields a disparity index of 69.6.
In Model C, numerous additional variables are included that measure
individual financial assets, family structure, mobility, immigration
status, military status, and local macroeconomic conditions. Despite
the inclusion of all these additional explanatory variables, the
results still show that disparities in business formation rates remain
large, adverse, and statistically significant when we compare
individuals who are also similarly situated in terms of these
additional measures. The specific results for Model C show:
For African Americans, the observed self-employment rate
is 6.5 percent and the model predicts that it would be 3 percentage
points higher--9.6 percent--if African Americans faced the same market
outcomes as non-minority males. This yields a disparity index of 68.3.
For Hispanics, the observed self-employment rate is 8.4
percent and the model predicts that it would be 1.8 percentage points
higher--10.2 percent--if Hispanics faced the same market outcomes as
non-minority males. This yields a disparity index of 82.3.
For Asian and Pacific Islanders, the observed self-
employment rate is 6.5 percent and the model predicts that it would be
4.9 percentage points higher--11.4 percent--if Asian and Pacific
Islanders faced the same market outcomes as non-minority males. This
yields a disparity index of 56.7.
For American Indians and Alaska Natives, the observed
self-employment rate is 6.2 percent and the model predicts that it
would be 4.1 percentage points higher--10.3 percent--if American
Indians and Alaska Natives faced the same market outcomes as non-
minority males. This yields a disparity index of 60.3.
For minorities as a group, the observed self-employment
rate is 7.8 percent and the model predicts that it would be 3.4
percentage points higher--11.2 percent--if minorities as a group faced
the same market outcomes as non-minority males. This yields a disparity
index of 69.9.
For non-minority females, the observed self-employment
rate is 7.4 percent and the model predicts that it would be 3.1
percentage points higher--10.5 percent--if non-minority females faced
the same market outcomes as non-minority males. This yields a disparity
index of 70.5.
For minorities and women as a group, the observed self-
employment rate is 7.6 percent and the model predicts that it would be
3.5 percentage points higher--11.1 percent--if minorities and women as
a group faced the same market outcomes as non-minority males. This
yields a disparity index of 68.5.
Table 12. Actual and Potential Minority and Female Business Formation
Rates, 2014-2018, Architecture/Engineering
------------------------------------------------------------------------
Current Expected Disparity
Business Business Index
Formation Formation -----------
Race, Location Rate (%) Rate (%)
------------------------ (3)
(1) (2)
------------------------------------------------------------------------
Regression Model A......................................................
------------------------------------------------------------------------
African American.................... 6.54 11.77
Hispanic............................ 8.37 11.78
Asian and Pacific Islander.......... 6.45 11.54
American Indian and Alaska Native... 6.18 11.50
Two or More Races................... 8.68 11.92
Minority............................ 7.40 11.94
Non-minority female................. 7.84 11.99
DBE................................. 7.60 12.25
Non-minority male................... 12.15
------------------------------------------------------------------------
Regression Model B......................................................
------------------------------------------------------------------------
African American.................... 6.54 10.13
Hispanic............................ 8.37 9.92
Asian and Pacific Islander.......... 6.45 10.89
American Indian and Alaska Native... 6.18 10.54
Two or More Races................... 8.68 9.83 88.30
Minority............................ 7.40 10.50
Non-minority female................. 7.84 10.98
DBE................................. 7.60 10.92
Non-minority male................... 12.15
------------------------------------------------------------------------
Regression Model C......................................................
------------------------------------------------------------------------
African American.................... 6.54 9.58
Hispanic............................ 8.37 10.17
Asian and Pacific Islander.......... 6.45 11.37
American Indian and Alaska Native... 6.18 10.25
Two or More Races................... 8.68 9.85 88.12
Minority............................ 7.40 10.49
Non-minority female................. 7.84 11.22
DBE................................. 7.60 11.09
Non-minority male................... 12.15
------------------------------------------------------------------------
Source and Notes: See Table 10.
2. Discrimination Impacting Business Earnings
Even for those disproportionately few minority and female
entrepreneurs who manage against the odds--as we have just seen from
the results in Tables 10-12--to form their own businesses, their
earnings from those businesses tend to lag far behind their non-
minority male counterparts. These disparities, just as those observed
with respect to business formation, tend to remain large, adverse, and
statistically significant--even when other important non-discriminatory
attributes are held constant.
a. Methods and Data
I examined deficits in business owner earnings between minorities,
women, and their non-minority male counterparts using the same
framework as above. Model A included only the race, sex, and time
indicators, thus showing the raw disparities in earnings between the
groups. Model B consisted of our set of qualifications and capacity
controls, which include educational attainment, geographic location,
and labor market experience. Finally, Model C included all the controls
from Models A and B plus those for individual financial assets, family
structure, mobility, immigration status, military status, and local
macroeconomic conditions.
b. Economy-Wide Findings
As shown in Table 13, the baseline regression equation (Model A)
includes only indicators for race, sex and time. This is the raw
difference in earnings between minority and women business owners, one
the one hand, and non-minority male business owners, on the other. The
results for Model A show:
African American business owners earned 46.2 percent less
than non-minority male business owners from 2014-2018. In other words,
for each dollar of business earnings accruing to non-minority males,
African American business owners made just 54 cents.
Hispanic business owners earned 26.9 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Hispanic business
owners made just 73 cents.
Asian and Pacific business owners earned 8.9 percent less
than non-minority male business owners from 2014-2018. For each dollar
of business earnings accruing to non-minority males, Asian and Pacific
business owners made just 91 cents.
Native business owners earned 44 percent less than non-
minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Native business
owners made just 56 cents.
Minority business owners earned 29.9 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, minority business
owners made just 70 cents.
Non-minority female business owners earned 46.3 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, non-
minority female business owners made just 54 cents.
Minority and Female business owners earned 39.2 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, minority
and female business owners made just 61 cents.
In Model B, which accounts for some common qualifications and
capacity controls, we observe small changes in both directions for all
the groups except Asian and Pacific Islanders, for whom the business
earnings gap increases significantly compared to Model A. Specifically,
the results for Model B show:
African American business owners earned 44.8 percent less
than non-minority male business owners from 2014-2018. In other words,
for each dollar of business earnings accruing to non-minority males,
African American business owners made just 55 cents.
Hispanic business owners earned 26.1 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Hispanic business
owners made just 74 cents.
Asian and Pacific business owners earned 18.2 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, Asian and
Pacific business owners made just 82 cents.
Native business owners earned 40.6 percent less than non-
minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Native business
owners made just 59 cents.
Minority business owners earned 30.9 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, minority business
owners made just 69 cents.
Non-minority female business owners earned 45 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, non-
minority female business owners made just 55 cents.
Minority and Female business owners earned 39.6 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, minority
and female business owners made just 60 cents.
In Model C, which accounts for a large set of additional
explanatory variables related to business owner earnings, we again
observe small changes in both directions for all the groups except
Asian and Pacific Islanders, for whom the business earnings gap
increases significantly compared to Model B. Specifically, the results
for Model C show:
African American business owners earned 38.2 percent less
than non-minority male business owners from 2014-2018. In other words,
for each dollar of business earnings accruing to non-minority males,
African American business owners made just 62 cents.
Hispanic business owners earned 29.4 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Hispanic business
owners made just 71 cents.
Asian and Pacific business owners earned 28.9 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, Asian and
Pacific business owners made just 71 cents.
Native business owners earned 36.9 percent less than non-
minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Native business
owners made just 63 cents.
Minority business owners earned 44.4 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, minority business
owners made just 56 cents.
Non-minority female business owners earned 33.3 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, non-
minority female business owners made just 67 cents.
Minority and Female business owners earned 41.1 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, minority
and female business owners made just 59 cents.
All of these economy-wide findings are statistically significant at
a 95 percent probability level or better.
Table 13. Minority and Female Business Owner Earnings Disparities, All
Industries
------------------------------------------------------------------------
Business Cents
Earnings Earned Per
Deficit Dollar of
(%) Non-
Race, Location ------------ Minority
Male
Earnings
(1) -----------
(2)
------------------------------------------------------------------------
Regression Model A......................................................
------------------------------------------------------------------------
African American................................ -
Hispanic........................................ -
Asian and Pacific Islander...................... -
American Indian and Alaska Native............... -
Two or More Races............................... -
Minority........................................ -
Non-minority female............................. -
DBE............................................. -
------------------------------------------------------------------------
Regression Model B......................................................
------------------------------------------------------------------------
African American................................ -
Hispanic........................................ -
Asian and Pacific Islander...................... -
American Indian and Alaska Native............... -
Two or More Races............................... -
Minority........................................ -
Non-minority female............................. -
DBE............................................. -
------------------------------------------------------------------------
Regression Model C......................................................
------------------------------------------------------------------------
African American................................ -
Hispanic........................................ -
Asian and Pacific Islander...................... -
American Indian and Alaska Native............... -
Two or More Races............................... -
Minority........................................ -
Non-minority female............................. -
DBE............................................. -
------------------------------------------------------------------------
Source and Notes: Calculations by the author from the 2014-2018 ACS
PUMS. Figures in italics are statistically significant at a 95 percent
probability level or better.
c. Findings for Construction
As shown in Table 14, the baseline regression equation (Model A)
includes only indicators for race, sex and time. This is the raw
difference in earnings between minority and women business owners, one
the one hand, and non-minority male business owners, on the other. The
results for Model A show:
African American business owners earned 40.4 percent less
than non-minority male business owners from 2014-2018. In other words,
for each dollar of business earnings accruing to non-minority males,
African American business owners made just 60 cents.
Hispanic business owners earned 12.4 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Hispanic business
owners made just 88 cents.
Asian and Pacific business owners earned 1.1 percent less
than non-minority male business owners from 2014-2018. For each dollar
of business earnings accruing to non-minority males, Asian and Pacific
business owners made just 99 cents.
Native business owners earned 30.4 percent less than non-
minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Native business
owners made just 70 cents.
Minority business owners earned 17.3 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, minority business
owners made just 83 cents.
Non-minority female business owners earned 45.6 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, non-
minority female business owners made just 54 cents.
Minority and Female business owners earned 22.3 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, minority
and female business owners made just 78 cents.
In Model B, which accounts for some common qualifications and
capacity controls, we observe small changes in both directions for all
the groups except Asian and Pacific Islanders, for whom the business
earnings gap increases significantly compared to Model A. Specifically,
the results for Model B show:
African American business owners earned 39.9 percent less
than non-minority male business owners from 2014-2018. In other words,
for each dollar of business earnings accruing to non-minority males,
African American business owners made just 60 cents.
Hispanic business owners earned 11 percent less than non-
minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Hispanic business
owners made just 89 cents.
Asian and Pacific business owners earned 10.7 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, Asian and
Pacific business owners made just 89 cents.
Native business owners earned 26.9 percent less than non-
minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Native business
owners made just 73 cents.
Minority business owners earned 18.5 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, minority business
owners made just 82 cents.
Non-minority female business owners earned 46.4 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, non-
minority female business owners made just 54 cents.
Minority and Female business owners earned 25.1 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, minority
and female business owners made just 75 cents.
In Model C, which accounts for a large set of additional
explanatory variables related to business owner earnings, we again
observe small changes in both directions for all the groups except
Asian and Pacific Islanders, for whom the business earnings gap
increases significantly compared to Model B. Specifically, the results
for Model C show:
African American business owners earned 32.8 percent less
than non-minority male business owners from 2014-2018. In other words,
for each dollar of business earnings accruing to non-minority males,
African American business owners made just 67 cents.
Hispanic business owners earned 16.7 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Hispanic business
owners made just 83 cents.
Asian and Pacific business owners earned 21.6 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, Asian and
Pacific business owners made just 78 cents.
Native business owners earned 22.2 percent less than non-
minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Native business
owners made just 78 cents.
Minority business owners earned 47.5 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, minority business
owners made just 52 cents.
Non-minority female business owners earned 22.5 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, non-
minority female business owners made just 78 cents.
Minority and Female business owners earned 30.7 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, minority
and female business owners made just 69 cents.
With only one exception, once again, all of these findings for the
construction regressions are statistically significant at a 95 percent
probability level or better.\38\
---------------------------------------------------------------------------
\38\ The sole exception is again the result in Model A for Asian
and Pacific Islanders. However this result was not statistically
significant.
Table 14. Minority and Female Business Owner Earnings Disparities,
Construction
------------------------------------------------------------------------
Business Cents
Earnings Earned Per
Deficit Dollar of
(%) Non-
Race, Location ------------ Minority
Male
Earnings
(1) -----------
(2)
------------------------------------------------------------------------
Regression Model A......................................................
------------------------------------------------------------------------
African American................................ -
Hispanic........................................ -
Asian and Pacific Islander...................... -1.1 99
American Indian and Alaska Native............... -
Two or More Races............................... -
Minority........................................ -
Non-minority female............................. -
DBE............................................. -
------------------------------------------------------------------------
Regression Model B......................................................
------------------------------------------------------------------------
African American................................ -
Hispanic........................................ -
Asian and Pacific Islander...................... -
American Indian and Alaska Native............... -
Two or More Races............................... -
Minority........................................ -
Non-minority female............................. -
DBE............................................. -
------------------------------------------------------------------------
Regression Model C......................................................
------------------------------------------------------------------------
African American................................ -
Hispanic........................................ -
Asian and Pacific Islander...................... -
American Indian and Alaska Native............... -
Two or More Races............................... -
Minority........................................ -
Non-minority female............................. -
DBE............................................. -
------------------------------------------------------------------------
Source and Notes: See Table 13.
d. Findings for Architecture/Engineering
As shown in Table 15, the baseline regression equation (Model A)
includes only indicators for race, sex and time. This is the raw
difference in earnings between minority and women business owners, one
the one hand, and non-minority male business owners, on the other. The
results for Model A show:
African American business owners earned 59.2 percent less
than non-minority male business owners from 2014-2018. In other words,
for each dollar of business earnings accruing to non-minority males,
African American business owners made just 41 cents.
Hispanic business owners earned 16.3 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Hispanic business
owners made just 84 cents.
Asian and Pacific business owners earned 23.4 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, Asian and
Pacific business owners made just 77 cents.
Native business owners earned 60.8 percent less than non-
minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Native business
owners made just 39 cents.
Minority business owners earned 30 percent less than non-
minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, minority business
owners made just 70 cents.
Non-minority female business owners earned 46 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, non-
minority female business owners made just 54 cents.
Minority and Female business owners earned 39 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, minority
and female business owners made just 61 cents.
In Model B, which accounts for some common qualifications and
capacity controls, we observe once again just small changes in both
directions for all the groups except Asian and Pacific Islanders, for
whom the business earnings gap increases significantly compared to
Model A. Specifically, the results for Model B show:
African American business owners earned 55 percent less
than non-minority male business owners from 2014-2018. In other words,
for each dollar of business earnings accruing to non-minority males,
African American business owners made just 45 cents.
Hispanic business owners earned 6.9 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Hispanic business
owners made just 93 cents.
Asian and Pacific business owners earned 28.1 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, Asian and
Pacific business owners made just 72 cents.
Native business owners earned 70.5 percent less than non-
minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Native business
owners made just 30 cents.
Minority business owners earned 27.2 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, minority business
owners made just 73 cents.
Non-minority female business owners earned 43.4 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, non-
minority female business owners made just 57 cents.
Minority and Female business owners earned 36.7 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, minority
and female business owners made just 63 cents.
In Model C, which accounts for a large set of additional
explanatory variables related to business owner earnings, we again
observe just small changes in both directions for all groups.
Specifically, the results for Model C show:
African American business owners earned 50.6 percent less
than non-minority male business owners from 2014-2018. In other words,
for each dollar of business earnings accruing to non-minority males,
African American business owners made just 49 cents.
Hispanic business owners earned 9.1 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Hispanic business
owners made just 91 cents.
Asian and Pacific business owners earned 30.7 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, Asian and
Pacific business owners made just 69 cents.
Native business owners earned 71 percent less than non-
minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, Native business
owners made just 29 cents.
Minority business owners earned 45.1 percent less than
non-minority male business owners from 2014-2018. For each dollar of
business earnings accruing to non-minority males, minority business
owners made just 55 cents.
Non-minority female business owners earned 28.9 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, non-
minority female business owners made just 71 cents.
Minority and Female business owners earned 39.5 percent
less than non-minority male business owners from 2014-2018. For each
dollar of business earnings accruing to non-minority males, minority
and female business owners made just 60 cents.
With only two exceptions, all of these findings for the
Architecture/Engineering regressions are statistically significant at a
95 percent probability level or better.\39\
---------------------------------------------------------------------------
\39\ The exceptions are the results in Models B and C for
Hispanics.
Table 15. Minority and Female Business Owner Earnings Disparities,
Architecture/Engineering
------------------------------------------------------------------------
Business Cents
Earnings Earned Per
Deficit Dollar of
(%) Non-
Race, Location ------------ Minority
Male
Earnings
(1) -----------
(2)
------------------------------------------------------------------------
Regression Model A......................................................
------------------------------------------------------------------------
African American................................ -
Hispanic........................................ -16.3 84
Asian and Pacific Islander...................... -
American Indian and Alaska Native............... -60.8 39
Two or More Races............................... -
Minority........................................ -
Non-minority female............................. -
DBE............................................. -
------------------------------------------------------------------------
Regression Model B......................................................
------------------------------------------------------------------------
African American................................ -
Hispanic........................................ -6.9 93
Asian and Pacific Islander...................... -
American Indian and Alaska Native............... -
Two or More Races............................... -
Minority........................................ -
Non-minority female............................. -
DBE............................................. -
------------------------------------------------------------------------
Regression Model C......................................................
------------------------------------------------------------------------
African American................................ -
Hispanic........................................ -9.1 91
Asian and Pacific Islander...................... -
American Indian and Alaska Native............... -
Two or More Races............................... -
Minority........................................ -
Non-minority female............................. -
DBE............................................. -
------------------------------------------------------------------------
Source and Notes: See Table 13.
e. Conclusions from American Community Survey Data
This section has documented that when we examine the status of
minorities and women compared to non-minority males in the industry
segments relevant to Federal surface and aviation transportation
funding, the results look very similar to what we observe elsewhere in
the economy.
That is, even when other non-discriminatory factors are held
constant using the statistical technique of regression analysis, the
disparities in business formation rates between African Americans,
Hispanics, Asians and Pacific Islanders, American Indians and Alaska
Natives, and women, on the one hand, and their non-minority male
counterparts, on the other, remain large, adverse, and statistically
significant. I have documented such disparities in this testimony for
the Nation as a whole and throughout the states, and in the economy as
a whole as well as in Construction and Architecture/Engineering, which
are key industries with respect to Federal surface and aviation
transportation funding.
Furthermore, I have documented that even for those minority and
female entrepreneurs who manage against the odds to form their own
businesses, their earnings from those businesses lag far behind their
non-minority male counterparts.\40\ These disparities as well remain
large, adverse, and statistically significant even when other non-
discriminatory attributes are held constant.
---------------------------------------------------------------------------
\40\ In addition to the analyses of business owner earnings, I also
ran comparable analyses on the annual earnings of wage and salary
workers--as opposed to business owners--in the industry segments
relevant to Federal surface and aviation transportation funding as well
as in the economy as a whole. Disparities facing wage and salary
workers matter to the analysis of business enterprise discrimination
because that is where much of the entrepreneurial talent pool starts--
especially in industries such as construction, architecture, and
engineering. Though not reported here, the results of the wage and
salary regressions look very similar to those presented above--in the
vast majority of instances, large, adverse, and statistically
significant deficits were observed for African Americans, Hispanics,
Asians and Pacific Islanders, American Indians and Alaska Natives, and
non-minority women, as well as for minorities as a group and minorities
and women as a group.
---------------------------------------------------------------------------
These results are fully consistent with the conclusion that
discrimination continues to adversely affect minorities and women
operating in United States business markets, and in particular those
markets that are relevant to Federal surface and aviation
transportation funding.
E. Overall Conclusions
In preparing this testimony, I conducted extensive original
research using almost 100 previously produced disparity studies, and
current and past data from the Survey of Business Owners, the Annual
Business Survey, and the American Community Survey. This research is a
continuation of similar research I have performed over the course of my
career as an economist. Based on the findings presented above, I
conclude that there is strong evidence, both past and present, of
large, adverse, and statistically significant disparities facing
minority-owned and women-owned business enterprises in the United
States. Moreover, these disparities cannot be explained solely, or even
primarily, by differences between the relevant populations in factors
untainted by the effects of discrimination. These disparities are
primarily due to discrimination, in the economy as a whole, as well as
in the markets such as construction, architecture, and engineering that
most relevant to Federal surface and aviation transportation funding.
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Mr. DeFazio. Thank you, Dr. Wainwright, a good summary of
90 pages of comprehensive research. So thanks very much. Your
full research will be entered into the record.
So now we will proceed to questions. Each Member will have
5 minutes to question the witnesses. I will first begin by
recognizing myself.
Ms. Boyer, in addition to your testimony today, you sent a
compelling letter to the committee, when the committee
reauthorized the DBE program in H.R. 2 earlier this year. I ask
unanimous consent to put this letter in the record.
Without objection.
[The information follows:]
Letter of June 25, 2020, from Geri E. Boyer, P.E., President, Kaskaskia
Engineering Group, LLC, Submitted for the Record by Hon. Peter A.
DeFazio
June 25, 2020.
Congressman Peter DeFazio,
Chairman,
House Committee on Transportation and Infrastructure, United States
House of Representatives, Washington, DC.
RE: Response to the request from the Committee on Transportation and
Infrastructure for a letter or statement on the Disadvantaged Business
Enterprise Program.
Dear Congressman DeFazio:
I am a licensed professional engineer and sole owner of Kaskaskia
Engineering Group, a civil engineering design firm. My firm has had the
opportunity to work on public infrastructure projects across the
Midwest, and approximately 82% of the $10,000,000 of work done every
year can be attributed to the Disadvantaged Business Enterprise Program
(DBE). It is because of the DBE Program that my firm is in existence
and continues to grow.
For the first twenty five years of my civil engineering career, I
experienced discrimination on many levels including advancement and
salary. I was told over and over by supervisors at a state agency that
although I was an overachiever and did excellent work it would not be
reflected in my yearly raise because I was not ``the breadwinner'' of
my family. When I left that agency, the lowest paid managers were all
women. In those years, I was also told that I needed to make a choice
between being an engineer and being a mother. My inspiration for
started my own firm was to take care of myself, to have the flexibility
to work while being a mother, and to afford those same opportunities to
other women and men.
The only reason I was able to start my own business was the DBE
program. I worked with DBE firms while employed by a large ``white-male
led'' company, and realized that with the help of the program, I could
be a business owner. I survived the first year while working through
the certification processed on small city projects I got because of my
reputation. Those projects were small and it was only enough fee to
keep a few people busy. Once I was BDE certified, many consulting firms
used my firm to satisfy their DBE requirement. My firm grew fast once I
had the certification.
Even though I have been in business for 14 years and won several
statewide awards for my engineering, I still cannot compete with
established engineering firms owned/managed by white-males. I have
participated in many equity surveys and discussions, and the question
always comes up about the need for this program to continue. I can
testify that without this program, the work I get on federal and state
infrastructure projects would cease. The only reason other firms team
with me is because I am a certified DBE firm first and then because I
do excellent work. I am not their buddy. I do not look like them. Large
firms do and will continue to keep all the work for themselves unless
they are mandated to give a percentage away. Small firms do not have
the capacity to propose on large projects by themselves, so without the
DBE program, small firms would never have a chance to work on a portion
of these large projects.
Instead of discussing if the program is needed, the discussion
should center around expanding the program by increasing the limits and
making the program more accessible. A policy of helping small
businesses owned and controlled by socially and economically
disadvantaged individuals, including minorities and women,
participating in contracting opportunities created by Department of
Transportation (DOT) financial assistance programs, has been in effect
for more than 20 years. It has had several revisions which has made the
program function more efficiently for business such as the Unified
Certification Program (UCP) and the interstate certification provision.
But there is still more that needs to be done to help this program be
more successful.
In an ever changing and volatile business market, corporate growth
and stability rely on diversification strategies, which often include
providing services to multiple federal, state, and local agencies, as
well as private corporations across regional, national, and
international markets. Diversification has long been a successful
strategy for large businesses, but it is just as important for the
survival and development of small firms.
Firms owned by women and minority groups that want to employ
diversification strategies are encumbered by the individual state
agencies that do not want to accept the DBE's certification from their
cognizant certifying agency. The amended 49 CFR Part 26, which went
into effect on November 3, 2014, implemented a revised uniform
certification application and reporting forms and created a uniform
personal net worth form for use by applicant owners, which collects the
data required by the Department's Surface Transportation
Reauthorization, Moving Ahead for Progress in the 21st Century Act
(MAP-21). Even though there is a uniform process, states do not trust
the certification process of neighboring states and require the entire
application again. This creates unnecessary work for the DBE firm and
the public agency who both have limited time and budget pressures. And
with the rising problem of identity theft, it's stressful to be sending
all your personal information to multiple agencies in multiple states.
A national unified program could strengthen, streamline, and
simplify the DBE certification program, creating a program that is more
efficient and effective for women and minority firms working for
multiple agencies across multiple states. A National UCP to serve as a
``one-stop shopping'' to applicants for certification is needed. Any
state agency using the unified certification application could be a
coordinating member of the National UCP, and its certification would be
recognized as a National UCP. Under a National UCP, the firm applies
one time for certification as DBE with their participating cognizant
agency or a national organization. If approved, that certification
would be honored by all recipients of federally funded and non-
federally funded projects in all states. The National UCP would only
certify firms using the unified certification application.
Prequalification, determination if an applicant has the requisite
resources and experience to complete the service/category as required,
would remain with the contracting agency.
The certification and record would be held by a national agency/
organization, such as the Federal Highway Administration (FHWA),
National Council of Examiners for Engineering and Surveying (NCEES) or
Women's Business Enterprise National Council (WBENC). The FHWA has
offices in every state and would be locally available to firms that
have questions or need to meet in person. NCEES and WBENC already have
systems in place to review a standard application, evaluate its
compliance with federal regulations, and certify its credibility. They
both allow for the upload of documents necessary for annual renewal
(Affidavit of Continued DBE Certification). WBENC's regional offices
also have the capacity to conduct site visits for compliance with the
49 CFR Part 26. Members of the NCEES system can easily request their
record be sent to other states for licensure. A similar system could be
employed by NCEES for a National UCP. A national unified program could
strengthen, streamline, and simplify the DBE certification program,
creating a program that is more efficient and effective for women and
minority firms working for multiple agencies across multiple states.
If you have any questions or need any additional information,
please contact me.
Respectfully,
Geri E. Boyer, P.E.,
President, Kaskaskia Engineering Group, LLC.
Mr. DeFazio. You know, you detailed experiences there with
discrimination throughout your career. And you said it was only
because of the DBE program you were able to start your
business, grow your business in the face of that
discrimination. And one quote was, ``Even though I have been in
business for 14 years and won several statewide awards for my
engineering, I still cannot compete with established
engineering firms owned and managed by White males. I have
participated in many equity surveys and discussions, and the
question always comes up about the need for this program to
continue. I can testify that without this program, the work I
get on Federal and State infrastructure projects would cease.
The only reason other firms team with me is because I am a
certified DBE firm first and then because I do excellent work.
I am not their buddy. I do not look like them.''
That is pretty compelling, Ms. Boyer. You stand by that
quote?
Ms. Boyer. Absolutely.
Mr. DeFazio. Yes, OK. That is pretty sad.
Ms. Williams, would you agree with Ms. Boyer's assessments
in these matters?
Ms. Williams. Absolutely.
Mr. DeFazio. OK. Well, that really underlines why we are
here today, why we are reauthorizing the program, and also
looking at ways to make the program work better.
Dr. Wainwright, at the end of your testimony you mentioned
the private-sector study versus the public sector with the DBE
program. Can you give us a rough, quantified comparison in any
way, in brief?
I know that you go into it in more depth in your study,
but--Dr. Wainwright, are you still there?
[Pause.]
Mr. DeFazio. Yes, I see you over there. You need to unmute.
Mr. Wainwright. Yes, I am not sure I fully understand the
question. Can you----
Mr. DeFazio. Well, you concluded, the private sector versus
public sector, and you are doing these comparative studies. In
aggregate, is there any way--can we say--it is a small
percentage of the work, overall, in the public programs? What
percent is it where the public programs with DBE aren't--how
much smaller is that?
Mr. Wainwright. Oh, sure. I think I understand now, sorry.
Mr. DeFazio. Yes.
Mr. Wainwright. The public sector, as a share of the
overall economy, is maybe 20 percent. The DBE program and
programs like it throughout the country are, you know, to some
degree, a finger in the dike. You don't see these programs very
much at all in the private sector. So you have got the DBE
program and programs like it, trying on their own, largely, to
remedy discrimination and remediate discrimination, with only
20 percent of the economic activity to work with. The other 80
percent remains practically untouched.
Mr. DeFazio. Great. That is what I was looking for. I
didn't know what the comparison was. So 20/80, and then we get
a fraction of the 20. So----
Mr. Wainwright. That is correct.
Mr. DeFazio. Thanks.
To anybody else, I have got about 1 minute left. Anybody
else want to expand on their remarks for about 1 minute?
[No response.]
Mr. DeFazio. OK, I am not hearing anybody.
Oh, go ahead.
Ms. Lerdahl. I would just like--this is Mary Lerdahl
again--I would just like to reiterate the importance of
waivers, and the effect that they have on hurting DBE firms
that, while they may have enjoyed some success within the DBE
group, they are still far from being ready to be kicked out or
graduated from the program.
I think also that in Washington, the waiver that was
enacted to exclude White women actually really separated the
DBE community, and actually pit one group against the other,
which, of course, you know, it is the last thing that we need.
We want to bring DBE communities together. And they are--you
know, just by the numbers of statistics, there will always be
one group that is going to do better in any particular data
segment than another. But overall, the DBE community still is
just getting pennies of the Federal highway dollar.
So I would like to submit that the committee consider that
waivers should never be enacted against one group or another.
They are very destructive, and they are not necessary. In our
State of Washington, because we were covered by the Ninth
Circuit District for court decisions, I realize that the State
of Washington had the opportunity to ask for a waiver, but it
was not required that they seek a waiver. And that is an
important distinction that I hope that the committee would
perhaps consider writing into the reenactment, that never again
that waivers would waiver out one group in the DBE community
against the other. Thank you.
Mr. DeFazio. OK, thanks for that observation. Now I would
turn to Ranking Member Graves for his questions.
Oh, no. He's not there. It would be Representative Weber
who will ask.
Mr. Weber. Thank you, Mr. Chairman. I have questions for
Farad Ali, and I am not sure how we get him up on the screen. I
guess we look to whoever the speaking part is.
Mr. Ali, does the DBE program assist minorities in
attaining financing?
Mr. Ali. Thank you for your question. I have been also the
executive director of the Small Business Transportation
Resource Centers that is through your NCDOT funding. In that
program, part of the milestones are to provide technical
assistance and access to capital, or resources for them to get
that access to capital. But the program doesn't actually
provide the financing. You have to go out and find sources.
I will tell you in my work I have seen that we have had to
go out and find specialized--or people of color or women to
support this group, to help them, to show a duty of care, to
make sure they can get the financing and the bonding necessary
to participate on roadside projects, as well as the ACDBEs. So
you also do see some institutional discrimination in that work,
from allowing people to show duty of care and helping others.
Mr. Weber. Are you able--when that happens, do you have a
matrix? Are you able to track how--from each project or each
company, how good it went, what the pitfalls were, and how to
improve upon that?
Mr. Ali. Yes, thank you. Great question again, Congressman.
In our program, what we would do is look at some of the ways
that we--weaknesses in the DBEs, or that we may see that are
important. We find ways to strengthen it, if it is on asset
base, or if it is credit, or whatever it may be, to help them
to get the financing.
Again, the financial system has not always treated ACDBEs
or even DBEs fairly.
And it is hard to speak to this, because I know in the
banking system or the financial system, there are rules of the
way people operate. But it is also the ways that people have
culture in allowing people to feel like they can have
opportunity.
So we do measure, when people actually look for financing
opportunities, figure out ways to help them to overcome any
obstacles, and then success in getting them financing or
bonding needed to meet the requirements of the project.
The answer is yes.
Mr. Weber. OK, that is good to know. And then I am going to
jump over to Ms. Sandra Norman, if I may.
Ms. Norman, what would you say, in your experience, is the
biggest obstacle to increasing minority participation in
transportation-related projects in your State?
Ms. Norman. I would say, as you just talked about, access
to capital. The other part, too, is the--how we procure
projects, making sure that our DBEs have the opportunity on the
design side of the house, as well as the construction side of
the house, so making sure that we do set aside some smaller
bundle of projects so that the small business DBEs will have
the opportunity to compete and win contracts. We just don't
want them to compete for it, we want them to be awarded the
contract, and be successful in carrying it out from beginning
to end, making that project a win-win for both the DBE and for
the DOT.
Mr. Weber. So, as kind of a follow up, I guess, with my
question with Mr. Ali, do you have a process, Ms. Norman, with
the way you are doing it?
I mean, is there a hotline for help set up? Do you
encourage participation? Do you reach out and get feedback from
them, I guess?
Ms. Norman. Just like Mr. Ali, we do have what we call the
BOWD Center, the Business Opportunity Workforce Development
Center. It is through a supportive services program. We do
provide technical assistance. And one of the things that I do,
I do a lot of outreach, a lot of networking through different
entities, through different partnerships with State, local
programs, so that our DBEs will have that opportunity.
But sometimes the requirements for our DBEs are stricter
and harder for them to have that level playing field with
regards to access to capital.
But to your point, yes, we do provide technical support and
assistance, make sure that we do have partnership opportunities
for our DBEs.
Mr. Weber. Well, thank you for that.
I have been kind of setting the stage for you, Ms. Lerdahl.
You are the last one up. I am quickly getting close to my time,
and I appreciate the chairman's indulgence. Since you have run
a company, Ms. Lerdahl--you have heard the panelists,
especially the last two that I have had questions for--from
your business experience, would you be able to give them
suggestions--maybe you want to hire on as a consultant, I don't
know, but would you be able to give them suggestions on how to
better help these companies successfully compete on these jobs?
Ms. Lerdahl. Yes, thank you. Well, I do think they touched
on the importance of access to capital. I will state that, in
the 9 years I was in business, I was never able to obtain a
line of credit, except for the one project that was provided
through the Small Business Transportation Center. I was able to
get a $250,000 line of credit to do one particular project. So
that really did help. But the rest of my work, $80 million
worth of work, was done without a line of credit. So I became a
really good bill collector; otherwise, I couldn't pay.
I do think, too, there is definitely, not only in the
banking segment, discrimination against small business, and
particularly women- and minority-owned businesses, but also
with creditors. I was not able to get the pricing on big loads
of material--$500,000 pull orders, for example--that my larger
contracting competitors could.
So--and there was a few times I tried to pursue collusion
within the supplier network, and that was a very difficult
thing to prove, because, of course, if they are not going to
bid to you, how can you prove that they are stacking the deck
against you?
I do think that there is also evidence of supplier fraud,
where even, unfortunately, DBE firms that are a supplier up the
pricing of a package of materials on bid day to a non-DBE
electrical firm or other firm in order to win the bid, because
they can count 60 percent of that billable material. So that,
again, stacks against DBEs. It is almost the DBE supplier
working against the DBE contractor.
And so there is a lot of games that get played in the
supplier DBE industry, unfortunately, as well as access to
credit in both the suppliers and the banking forums.
Mr. Weber. Well, thank you for that. It sounds like you
would be a good resource for the other folks on the panel on
working on some of the pitfalls that a lot of these business
owners see.
So I appreciate your indulgence, Madam Chairwoman. I yield
back.
Ms. Norton [presiding]. I thank my good friend, and I
recognize myself for the next series of questions.
I think I want to start with Ms. Williams and Ms. Boyer,
because I am interested in why this discrimination continues to
occur.
Now, you would have the same ability, even more experience,
if the DBE program went away. So I would like you to elaborate
on why you think opportunities for small businesses like yours
would dry up--you all seem to have testified to that effect--
without the DBE program. I am trying to find whether there is a
real remedy here that is lasting.
For example, do you think that these contracts are based on
personal relationships that these companies have? Is it based
on the size they prefer, larger companies? Is it based on the
nature of the competition? Indeed, are they competed? I am
trying to get at the cause of what you have--virtually, all of
you have--elaborated as continuing discrimination,
notwithstanding the DBE program.
So I will start with Ms. Williams.
Ms. Williams. Thank you so much. I think that one of the
unintentional consequences of the DBE program is that the
program is set up to invite and encourage the checkbox. In
other words, you have to check the box [inaudible] so in large
majority firms, and the goal is 25 percent, I am looking for a
DBE, and I check the box. If I am a large, majority firm, I am
trying to get 40--50 to 60 percent of the project. And so, I
have got to give out 25. I mean it is all in the numbers.
And so I think if you graduated or you weren't a DBE, they
would not pick you as just a good engineering company.
[Inaudible.] So it is an unintentional consequence that the DBE
program has developed. But it is what it is.
Ms. Norton. Ms. Boyer, do you have any views on this?
Ms. Boyer. Yes, of course. So thank you for the question.
Excluding the city that I live in and I am headquartered
in, Belleville, Illinois, they give us work because we are
right here in their community, serving their needs, going the
extra mile all the time. And we do excellent work. And it
doesn't matter if I am a DBE here, because this is where I
work, and they know me. So I think a lot of it has to do with
relationships, although it is also about the culture of our
Nation.
And so, even though I work with large engineering firms,
and we give work back and forth all the time, I think for us in
Illinois it has more to do with--the Illinois Department of
Transportation really emphasizes that they want DBEs to
succeed, and they want prime firms to be giving DBEs chances to
lead. And they know the only way that they are going to win the
work is to work with DBEs, because that is what the State
wants.
So it is all about winning. It is all about getting a leg
up. And if a firm thinks that they are going to have a better
chance to win with a DBE, then we are great. Even if we do
fantastic work, they won't use us if they don't have to,
because it is all about winning the most. It is all about this
individual culture that we have in the U.S., that the more for
me, the better. And the only way people are going to share is
if they are made to share. I hate to say it.
Ms. Norton. Interesting to note, and it says a lot about
the importance of continuing this program, because you would
think, automatically, these firms, women- and minority-owned
firms, would work their way into the industry.
Ms. Lerdahl, I must say, your story was particularly
chilling to me, about the problems of women business owners.
And I am trying to find out the difference between waivers and
graduation from the program. I am confused on that. What is
your response for those who believe that the program should
exclude automatically certain groups, once they have attained
what is known as parity in the market?
Ms. Lerdahl. Well, thank you for that question. It is a
great one.
First, a big difference between graduating and the waiver.
The waiver sought to exclude White women as a result of a
disparity study. It, again, had some unusual data in it, with
these two big mega-projects, where billions of dollars of
contracts with multiple years of work were counted in that 2009
to 2011 study data period.
Other firms--ironically, the two biggest firms in our
State--one is Valley Electric, one is Elcon Electric--both used
to be DBE firms, but they were allowed the time and the length
of the runway to grow, and to graduate from the program. Elcon
is owned by an African-American gentleman, and Valley Electric
was a women-owned majority business. But they had----
Ms. Norton. They are not in the program any longer, those
two firms?
Ms. Lerdahl. Yes, they graduated from the program.
Ms. Norton. Yes, OK.
Ms. Lerdahl. But in the case of a waiver, we were
essentially kicked out by our own agency because of the
disparity study data that indicated that White women were
getting more than our share of the DBE dollar, which is
absolutely not true. So my company barely got [inaudible] and
started to do great projects, like the 520 bridge, and then I
was completely cut off at the knees.
And I would also share what the other ladies talked about,
not getting work without there being a condition of award. I
bid--from the time the waiver was enacted in June of 2017, I
bid hundreds of projects. I pulled out every networking--I
begged, I pleaded. I mean, I had never not finished a job on
time or ahead of schedule. I had done multiple millions of
dollars' worth of work, never with a problem. And I could not
get a single job. But that is because discrimination is even
more real than I thought.
Now, I have been in business for 22 years. I had a great
reputation in the community, and not only as a DBE firm, but as
an electrical contractor. I had been in business for 10 years
prior to starting my own firm, in a non-DBE firm. I knew
everybody. Everybody knew me. But I couldn't get one job to
save my company, and that is why my company died a death of
1,000 cuts over 18 months, $9 million a year to [inaudible].
Ms. Norton. Thank you. My time has expired. I do note that
you cited two firms that had graduated from the program. I
would hope that, if we have this hearing again, we will invite
at least one firm that has graduated from the program, so that
we can learn about what the program does for people to put them
on their own. I think that would have added a great deal to
this hearing.
I am pleased now to recognize Representative Davis.
Mr. Davis. Thank you, Madam Chair, and thanks again to all
the witnesses.
Ms. Boyer, I heard that Mr. Bost did a fine job with your
introduction while I was absent.
Ms. Boyer. Yes.
Mr. Davis. I do want to start my question with you. Based
on your experience, do you believe that a mentorship program
between prime contractors and your company, like your company,
Kaskaskia Engineering Group, would have been helpful to you
when you first became a business owner?
Ms. Boyer. Obviously, the mentor programs are so beneficial
in getting started, and even just getting into different forms
of work. So I have actually participated with mentor programs
in both engineering and on the contracting side.
The problem with mentor programs is it takes a lot of
administration, both by the companies and by the agency. So
often the followup and making sure that it is really happening
falls through the cracks, because people are short-staffed and
they are just too busy. But mentorships do work when there is
enough staff to make it work.
Mr. Davis. Great. Great to hear that. Another question for
you.
Has either the DBE program's personal net worth or the
gross receipts limitation factored into your decisionmaking
when considering new business opportunities?
Ms. Boyer. Absolutely. It is a strategy. I know right now
that I could not survive if I graduated out of the DBE program
right now. My foundation is not deep enough. And so, yes, it
has everything to do with the decisions that I make. I need to
stay in the program right now, because I have 45 mouths to feed
here.
Mr. Davis. Would you be more interested in getting off,
making more dollars available, if there was a better off-ramp
to move toward self-sufficiency?
Ms. Boyer. Absolutely. I mean, one of the things that I
actually looked at with a firm in Minnesota as they were
graduating out of the program is to form a joint venture with
them, a joint venture company, in a sense, that would go after
Federal work there, and share the work, me being a DBE, but
giving them, like, 40 percent of it to kind of pad them as they
graduated out of the program, and built and sustained
themselves.
In the end, we couldn't come up with an agreement. And I
think that there are a lot of problems right now with staffing
engineers. There is a huge shortage. And I think the close
relationship scared them, that their people might like our firm
better, and have some people move over. So they decided not to
do it with us.
But I think that just the exercise of looking at how can
you stabilize a firm as they jump out of the program, and
teaming with another DBE to share work back and forth could
lift both firms. So I think there are a lot of opportunities
there.
Mr. Davis. You know, it is great to hear, and that the
program has been so successful for companies like yours. But I
think some of the things you just mentioned, Ms. Boyer, could
make the program better. And we look forward to working with
you on those issues.
I know that this program has meant a lot for you and your
company. We heard about that in your opening statement. And I
just wanted to give you another chance. Is there anything that
you haven't yet said about this having an impact on you and
your life that you would like to mention to us in the
committee?
Ms. Boyer. Well, you certainly would never see a mother-
daughter engineering firm. And this program has made that
available.
Mr. Davis. Well, that is wonderful.
Ms. Boyer. I also do want to say that this idea of a
unified certification is so important. And, you know, we have a
lot of stuff going on in the United States right now. We have
the DBE program, but we also have a lot of people trying
things. Our utility companies are trying to come up with their
own DBE programs, and they have separated out women and
minorities.
And so, you know, when I would work in 7 States, I have to
get 17 different certifications. And it just seems that we are
far enough along in our electronic world that we could have one
place, one repository, and that we could certify DBEs in
categories of women or minorities, so that everybody doesn't
have to do the same thing over and over and over. It takes one
full staff member of mine to just keep up with this.
So I think it can be simplified, but it takes our agencies
to trust each other. And the Small Business Administration does
a great job. They are the perfect candidate for something like
that.
Mr. Davis. That is another great idea. Look, we know--and
we see the emotion that you have shown us--how much of an
impact this has had in your life. Thank you for being here. I
look forward to seeing you in person again soon.
And I yield back the balance of my time.
Ms. Norton. The gentleman has yielded. I must say I was
very touched to hear the testimony about a mother-daughter
engineering firm. I mean, typically, we see businesses like
this passed on to sons. The notion that you had that effect
within your family is telling about the importance of this
program. I appreciated that, hearing that, very much.
We will next hear from Representative Larsen.
You are recognized for 5 minutes.
Mr. Larsen. Thank you. I have a question for Mr. Ali.
It is clear the pandemic continues to have a significant
impact on the U.S. aviation industry, particularly on airport
concessionaires. Even more concerning is the fact that
minority-owned small businesses are disproportionately impacted
by the effects of the pandemic. Could you cover for us how the
pandemic has affected AMAC members and airports, concessions,
disadvantaged business enterprises?
Mr. Ali. Yes, thank you, Congressman. It is really
important to understand the process of how these work. You look
at an airport--I look at it, really, as a hotel--and big
concessionaires, which are mainly foreign-owned, secure pieces
of the airport to be able to provide services for their
passengers.
And as you have heard earlier, a lot of the DBEs, the
status of DBE allows for them to partner with other minority-
and women-owned firms. And many of these concessionaires, these
large concessionaires, look for women- and minority-owned firms
to participate, and that is how they get a pathway into being
concessionaires, either from streetside to airports, or even
beginning new businesses.
A lot of the investment, the investment for these airports
to, as you could see, the--improvements inside of the airport
are shared cost by DBEs. So they are making investment in
public assets based on a contract for 5, 7, or 10 years, and
they have to pay those loans back, typically, to their master
concessionaire.
So when you have the COVID crisis, which took down 90
percent of the travel, a lot of these ACDBEs are now having to
still make payments which are not being received. And because
they made them in public assets, they can't get traditional
funding, which is really hard, because then, if you can't get
traditional funding from a bank, there is no way you could
refinance or restructure your loan. And as a result, you find
yourself in a cataclysm of debt, of not only business debt from
the pandemic, but business debt from being able to pay back
your loan.
So not being able to get access to the PPP, it didn't help
these businesses, ACDBEs. And some of them weren't able to get
the EIDL loan, because the EIDL loan, which was once at $2
million, went down to $150,000. But a lot of these businesses
needed the EIDL loan so that they could continue to cooperate
and manage inside of these airports.
So you find a lot of the concessionaires are in default,
which means they are in a position where they could be
eliminated from these contracts that they needed, and whatever
assets they had tied up would be lost.
Mr. Larsen. Yes. And what effect would large-scale closures
of the concessionaires have on airport operations?
Mr. Ali. It would do a whole lot of things for airport
operations, thanks for the question.
If you look at these ACDBEs or these DBEs that would be
eliminated from contracts, they will lose these opportunities.
You will have societal impacts to them where these communities
that look to these DBEs for support or hiring, so they would
lose all of these employees. These employees would lose houses.
I mean, the trickle-down effect of ACDBEs going out of
business or DBEs going out of business, please note if you look
at some of the statistical analysis, most DBEs hire people of
color or women than any other constituency groups. So when they
go out of business, it has a real trickle-down effect into
either of the communities and the airport community.
Mr. Larsen. Yes, thank you.
A question for Mr. McDonald. So, Mr. McDonald, I am the
chair of the Aviation Subcommittee and certainly acutely aware
of the lack of diversity in U.S. aviation and the need to
attract new talent to ensure this industry remains competitive.
In the time I have remaining, which is about 1 minute, I
think, can you discuss some of the successful initiatives that
you have implemented within the DBE program that have attracted
more participation from women- and minority-owned firms,
particularly related to aviation?
Mr. McDonald. Yes, I would say that through our community
partners--again, I am with the Office of Economic and Small
Business Development, and because of that we have community
partners. We have a group called the Greater Fort Lauderdale
Alliance that works with the attraction and the retaining of
businesses in our county.
And through that group, we also have a cohort of aviation
type businesses, but from education and training and
apprenticeship, we have been able to create a collaboration
where we attract not only those businesses, but we engage those
business opportunities, and we align that with our DBE program.
So our upside is by being an economic development office,
also operating the Small Business Program, also by
administering the Federal program, we leverage our resources
and our partnerships.
And, again, that is one of our saving graces. The idea that
we also have an aviation director who is supportive of the
program. We have education and institutional organizations that
are willing to commit their resources, and this becomes, as you
can imagine, attractive to the business community who
recognizes your growth and your opportunity.
Because, as you know, businesses always speak to do I have
access to that employee, to that individual who has the skill
set as well as the interest?
So it is through our collaboration and our partnerships
that we have been able to have some success in growing the
businesses, which also introduced opportunities for our DBEs to
participate.
Mr. Larsen. That is great. That is really helpful. I
appreciate that.
And according to my personal timer, I am out of time, and I
will yield back.
Thank you, Mr. McDonald.
Ms. Norton. I note this term ``trickle-down effect.'' It
seems to me that is very important to hear. We are talking
about engineering, where minorities and women have not
participated in nearly the numbers they do in other
professions.
So the notion that this encourages minorities and women to
even enter the profession, it seems to me, should be
encouraging to this committee.
I am pleased to recognize Representative Woodall at this
time.
Mr. Woodall. Thank you very much, Madam Chair.
I wanted to start with Dr. Wainwright. I appreciated his
likening our challenges to blood pressure medication, and we
certainly do not want to end the blood pressure medication.
I wanted to find out, Dr. Wainwright, if you saw anything
in your research that helped us on the pathway to a cure. I
have heard lots of concerns about graduating from the program.
I have heard lots of concerns about the impact of categorical
exclusions.
At the end of the day, the DBE program was intended to be a
step towards a cure. Do you see anything that could help us
alter the program in ways that alleviate some of the fears of
graduation and bring us closer to that societal cure?
Mr. Wainwright. Thank you, Representative.
A couple of things. One is I am not a policy guy as much as
a statistical guy. So I am not sure I can speak about what
detailed improvements in the DBE program might get to the cure,
as you are mentioning.
But as Chairman DeFazio mentioned at the beginning, one of
the touchstones for me would be to see greater spillover of
efforts like the DBE program, like the State and local MWBE
programs, into the private sector, which, as I mentioned, is
about 80 percent of the economic activity.
So the DBE program at its best is affecting a fraction of
20 percent that the public sector controls and, you know, still
more, we are talking today just about the transportation
sector.
In the 37 years that the program has been in effect, we are
starting to see some of that, but it is still a long, long way
off. When I started working on this in 1989, you never heard of
the term ``supplier diversity officer'' at a public agency, let
alone a private agency.
So there is a demonstration effect, I think, to see and
then to witness the positive effects that this program has on
many of the witnesses you have here today, business owners.
Hopefully, that has a demonstration effect into the private
sector and will encourage more private companies to diversify
their supply chains and their contracting and procurement
chains.
And when that day comes, I may be getting off my blood
pressure medicine at some point down the road from that. So
that is a great question. Thank you.
Mr. Woodall. I thank you for that, Dr. Wainwright.
I think it was Ms. Norman who mentioned that one of the
side effects of that blood pressure medication could just be
creating a check box program.
Ms. Norman, I kind of heard that from Ms. Lerdahl's
testimony, that she had done amazing work, built amazing
relationships, and as soon as she was excluded from the
program, all of that hard work disappeared because those folks
were not prioritizing her relationships or her quality work.
They were focused on getting that check box done.
Could you speak a little bit more about your concern that
it is turning into a check box program and maybe some ideas
about how we can solve that so that these relationships and
these good work ethics can be continued?
Ms. Norman. So while I do not want to just say it is a
check box--in essence, it is--but without it, sir, they would
not get these opportunities.
So it is very important to have that, to have these
demonstrated goals requirements, not just an aspiration, but a
requirement to make sure that part of the process that the DBEs
and women-owned businesses get that fair opportunity to bid and
compete and win those contracts.
The other part that can assist with that as Virginia, we
have what they call the Virginia Small Business Enterprise
Program, and that allows us to de-bundle some of these
contracts on the construction side of the house and the
professional services side of the house, $750,000 or less or up
to $1 million, looking at those projects to see for a
subcontractor to then step into the arena of being a prime.
So a lot of times these larger businesses forget that they
started out as a small business as well.
However, we have been fortunate on the construction side of
the house. We still have some work to do on the professional
services side of the house of identifying those kinds of
projects.
So while we say it is a check box, without that check box
these small businesses and women-owned businesses would not
have that opportunity.
Ms. Norton. Well, thank you.
Mr. Woodall. I certainly recognize to Chairwoman Norton's
point. When we have our next hearing on this topic, it hurts to
hear the fears of graduating from the program. Graduation
should be something that we are aspiring to.
But I hope we will be able to make some changes and explore
some ways to make them a more comfortable transition.
Chairwoman, thank you for your indulgence. I yield back.
Ms. Norton. I thank the gentleman for his questions.
We hear next from Representative Sires.
Mr. Sires. Thank you, Ms. Norton.
And thank you for the people that are giving testimony
today. It is very important.
Mr. Ali, thank you very much. My question will be directed
to you.
I represent a portion of the Newark Airport with my
colleague, Don Payne. We both represent the airport. You have
said that without the Disadvantaged Business Enterprise
programs some of the contracting opportunities for minorities
are gone.
Well, as you know, Newark Airport, the new terminal 1 is
being built, and they are probably now going through the
process of selecting bids. I am hopeful that minority women-
owned businesses, minority-owned Black businesses, and minority
Latino businesses get to participate in this process and are
able to secure some of these bids.
Would you know what percentage of minority women and
Latino-owned businesses currently represent airport concessions
across the country?
Mr. Ali. No, sir, I do not have that answer. That is
something the fiscal guy can tell you, the doctor. I do not
have all of those stats.
Mr. Sires. So you would not know anything about New Jersey
either, right?
Mr. Ali. No, sir, I am sorry. Not about specific or, I
mean, in general, no, sir.
Mr. Sires. Well, I think it would help if there would be
some data about how many minority businesses are participating
in these airports because we do not know if there are enough or
there are too many or there are not enough.
Mr. Ali. Yes, sir.
Mr. Sires. So I do not know who would put those statistics
together.
Mr. Ali. Yes, sir, Congressman. I believe that the FAA
should be able to provide you with that information, sir, as
well as the DOT Office of Civil Rights.
Mr. Sires. So I am going to get my staff on that because I
am very concerned that this new wing that we have in Newark,
this terminal 1, that the minorities get their fair share of
concessions in that new wing.
Mr. Ali. Yes, sir.
Mr. Sires. What role do you think that the DBE program
plays in the recovery of businesses like yours with this
pandemic? How has that impacted?
Mr. Ali. Sir, the businesses that we represent I will tell
you that COVID has adversely affected businesses in that they
have been able to have to deal with it. Most of the contracts
for ACDBEs have been secured against contracts with the
airports, and those airports have used contracting to get
rents, and those rents and those payments all go to pay for
bonding and other things inside of the airport and aviation
business.
So when you have a slowdown in traffic and those ACDBEs are
no longer able to get passengers to pay the facility charges or
the costs, it becomes a really critical role of making sure
that we have the ACDBEs involved, but they also lose out when
the airport industry is inhibited by the lack of passengers.
Mr. Sires. And have you noticed where there is big
investment in airports across the country where the minority
businesses are able to take part after such investments in some
of these airports, or do you feel that maybe they are cast out
some places?
Mr. Ali. Yes, thank you. That is a really good question.
I do believe that you have offered, in your funding to
these airports, you have offered the opportunity for them to
share that with their concessionaires and the ACDBEs. It is my
understanding that each airport has the authority to make a
determination of how much they will share or if they will
share.
I think each area would need to be audited for that
particular concern. So if you are interested in New Jersey and
New York, I think you should ask if the resources that you
provide for them, how much of that were they able to share with
the ACDBEs.
Mr. Sires. Yes, I am concerned about New Jersey and New
York, but quite frankly, I am concerned about the rest of the
country also because there is big investment in some of these
airports, and I would like to see minority-owned business not
be cast out because, well, you know how it works.
Mr. Ali. We have heard from our members that there has not
been shared prosperity with those resources. Those resources
have not necessarily been shared.
So members have asked airport directors and airport
authority members to share and find resources. I know of a
particular case out West where an ACDBE constituency group was
concerned that a major airport got a lot of resources, but
those resources have not been shared.
As a result, there has been a multimillion-dollar business
that may have to come back to the city council and ask for
additional funding because the airport did not share in the
resources to help them stay in business.
Mr. Sires. Well, if I can ever be of service.
Ms. Norton. Thank you very much.
Mr. Sires. Thank you.
Ms. Norton. The next question is from Representative Carol
Miller.
Mrs. Miller. Thank you, Acting Chairwoman Norton.
With some of your comments that you made earlier, the
thought came into my mind about how grateful I am that over the
last few years our educators are focusing more on STEAM and
STEM education, which will give the opportunity to all our
children, the little girls, the minority children, the
opportunity to learn what they need in order to have some of
these businesses, like mother-daughter engineering.
And thank you all, all of you, for being here today as
witnesses. I am grateful for the opportunity to hear from the
stakeholders that do represent DBEs and ACDBEs. The initials
are still kind of hard for me.
As these organizations attempt to cultivate their
businesses, it is important that we continue to monitor
discrimination so that we can continue to build and expand on
this program to allow for fair and equal opportunities to have
access.
Mr. Ali, could you please speak about the difference
between direct and indirect discrimination and what your
suggestions would be so that we could ensure that minority-
owned businesses are properly represented?
Mr. Ali. Yes. Thank you, Congresswoman.
I think it is important that you strengthen the program in
the way that you evaluate it and open up opportunities.
Direct discrimination is organizations making the
determination that they really are not going to have inclusion.
They say they will have inclusion.
I will tell you an example of the time I was in an airport
directors' meeting, and someone indicated that they were going
to do maybe 5 percent with minorities and try to do another 5
percent to get to the 10 percent.
And I indicated back with them at the meeting, well, then
maybe we will try to sign your contract.
The attitudes change really quickly. Within 48 hours they
were able to attain the other 5 percent to make sure they had
the 10 percent.
So to really enforce the utilization of good faith effort
at inclusion is going to be important.
Some of the other issues around institutional
discrimination are really cultural, and a lot of that has to be
really developed through organizations and sometimes through
policy, where people are not really allowing ACDBEs or DBEs to
come to the table, where they may put them inside of a
contract, as you heard from earlier testimony, but not have
them actually really participate and grow their business so
that they cannot just be airport-side. They can grow their
business to be on the private sector side that would help them
make it to the 80-percent level.
So this is truly not just a groundbreaking way to get
minorities and women into the transportation industry, but a
lot of them use this and catalyze this and leverage this
opportunity to be able to go to the private side, which allows
them to really grow their business and, as you would say,
graduate, but to really bifurcate their portfolio so they can
diversify it long enough so that they can be able to build
sustainable businesses.
Mrs. Miller. Thank you so much.
Mr. McDonald, following the COVID-19 pandemic, Broward
County has had to adjust and adapt their business practices to
help the DBEs stay on their feet. Could you speak to how
Broward County utilized current resources to prepare the DBEs
for the pandemic?
Did the county use the funds to prepare the DBEs for the
pandemic or to help them respond to the pandemic?
Mr. McDonald. Thank you for that question, a good question.
We actually did both. We were able, based on our
programming and our activity, and specifically projects,
because we had already scheduled some projects with aviation,
and we have some other county projects that also spoke to
transit rather than to our DBE activity that we already had
funds for.
So when we recognized the troubles of COVID, one of the
things that the commission had moved forward was to make sure
that projects that were aligned with dollars, we could still
continue those projects.
But in the meantime, as we also look forward to rolling
those projects out, we made sure in the economic development
side of our office that we also involved the necessary
handholding as our DBEs and other small businesses, minority
and women, were looking to identify if they could qualify for
PPP, EIDL, our regular State bridge loan program.
We also made sure that we worked closely with our Miami
office of the Small Business Administration to take other
additional resources that have always been available, but make
sure that those virtual workshops were in front of all of our
DBEs.
And where we are right now, we are beginning to roll out
projects and activities that we, again, have the funding for,
and since aviation traffic as one example is still slow, some
of the projects that our airport director was looking to do, we
can now start those projects. We can begin to align those
goals, and we can have a way for our DBEs to participate.
So we were able to at least juggle some opportunities on
the frontend, use projects the county had already committed as
a way to stabilize some of our DBEs, as well as to rejuvenate
our economy with those projects, but more importantly, it did
take time to make sure that those were projects that may not be
available, but were able to take advantage of those Federal
funds and other financial resources that were available.
Ms. Norton. Thank you very much.
The gentlelady's time has expired.
I want to call next on Representative Eddie Bernice
Johnson.
Ms. Johnson of Texas. Thank you very much, Madam Chair, and
thanks to all the witnesses present.
Let me say that this is my 28th year on this committee, and
this is the most prevailing concern that has been expressed to
me around the country since I have been a member of this
committee, most especially with my own area.
It was one of the first issues that I started working on
when I came to this committee. Secretary LaHood, who came from
this committee to become Secretary of Transportation, worked
with us on language in order to make sure that when the
language was put in the RFPs, there would be some sanctions if
they were not followed.
What we have gotten since we put this in place is a lot of
RFPs that included minorities, but never got them involved once
they got the RFP.
I have been visited with women, minority women from all
over this country complaining about that. He helped us come up
with language, but we could not get Chairman Mica to support it
at the time.
And I notice there that is still overwhelming evidence of
discrimination, and really when we first started looking at
this, there were companies that were putting the name of the
company into the spouse's name in order to get Anglo women
qualified. And so all of that has been experienced.
And I really have a great interest in fairness and
opportunity with it. So I have heard great testimony. I
appreciate everyone being here, but I want to know from the
witnesses when these RFPs are sent out and the minority
participation is dictated, have you experienced any reason to
believe that it is a serious effort to include minorities?
Let me start with Mr. McDonald.
Mr. McDonald. Thank you for the question.
I believe that to your point, and you have certainly been
at it longer than I have, but you are 100 percent correct. The
language that was put in, it is my job as a Disadvantaged
Business Enterprise Liaison Officer to make sure and work with
aviation and/or transit. When those RFPs cross our desk, I have
to make sure that language is there that even supersedes that
good faith effort.
I have to make sure that there is language that is not
impediments or hurdles to the minority. So, yes, I do believe
there have been situations, as the agency prepared the RFPs,
that that language that supports DBEs is silent and those
things that give opportunity to overwrite the program are
present.
But it is the responsibility of individuals like myself,
UCPs, as we are reviewing these, to catch that and to address
that, and I can say at least in my 7 years here in Broward,
especially the last 3 years, working with my aviation director
and my transit director, they have worked with me to assure
that their RFPs, and with their staff, we are addressing that.
But it is certainly has happened in the past, no question.
Ms. Johnson of Texas. Thank you very much.
Mr. McDonald, I have had minority women visit me in Dallas,
Texas, from Florida complaining that their names went into the
RFPs, but they never got a call or even a word after the
contract was let.
Have you heard any reports of that?
Mr. McDonald. Yes, I have, and one of the examples I can
explain is that when the DBEs are a part of the process and we
do the letters of interest and the prime has to identify which
DBEs they are going to be working with, as you can imagine,
most primes go out and find five or six to try to reach that
10, 15, or 20 percent goal.
When they submit their RFP, they have to identify
specifically which of the DBEs they are going to use. It is
that review that we do, and what we have started doing is
asking our agency. But the primes notify the non-DBEs or the
nonminorities that you are not going to use them.
But we require that they submit who they are actually going
to use as a part of the bid, and as a part of that posting, we
list that.
So it is true that a prime would have five or six to try to
reach their goal, but they only need two or three, and it is
the two or three they submit on the bid we hold them two, but
yes, the other ones should be notified that they were not used.
But we definitely record minority and women and the
participation.
Ms. Johnson of Texas. Thank you very much.
I have heard from my own city, the DART, which is the
Dallas Area Rapid Transit, that they have no power to insist
that the RFP that was selected include what they have in a
contract; that they cannot enforce the fact that they have
named the minority firm, and then they do not hire them.
Do you have difficulty looking at the language to see
whether or not there is enforcement language there? Because it
is not being done in Dallas, Texas.
And I just wonder if any of you have any experience with
saying that their hands are tied of the local authorities for
not sticking with the contract once it is let.
Mr. Ali? Unmute.
Mr. Ali. Yes, ma'am. Congresswoman, I apologize.
I not aware of the situation. I have heard many stories
like you have heard from Mr. McDonald of contracts like that,
but I am not aware of any specific situation where that has
occurred.
I have had members express this to me, but I have not been
witness to any of the information on it.
Ms. Norton. The gentlelady's time has expired.
Ms. Johnson of Texas. Yes, ma'am.
Ms. Norton. The gentlelady's time has expired.
Ms. Johnson of Texas. Thank you.
Ms. Norton. Representative Babin.
Dr. Babin. Yes, ma'am. Thank you so much, Madam Chair.
I want to thank all of you for your giving your time to
participate as witnesses today, and I appreciate the work that
went into setting up today's hearing.
However, I think we can all agree that the Department of
Transportation Disadvantaged Business Enterprise program is a
very important program and one that is overwhelmingly and
bipartisanly supported here in Congress.
And to suppose that anyone on this committee feels
otherwise I think would be misleading and politically
motivated.
Now, with that said, I will keep this short. Every single
day that focuses on identity politics is a day that we are not
focusing on finding solutions to very real problems, problems
like a debilitating national debt; a poor southern border where
our interstates and our highways are being used to transport
millions of tons of deadly drugs into our country; a port
system that today is being use to facilitate the real
institution of modern day slavery, and that is human
trafficking.
All of these issues and more deserve our full attention.
But we are here using our time and resources celebrating a
program that is already supported by the Trump administration,
by congressional Democrats and Republicans.
I am not saying that this program is not worthy at all. It
is certainly worthy of our attention, but much the opposite, as
we heard from Ms. Boyer's testimony earlier today, and that as
long as we emphasize identity politics, we can expect to see
more division, more exclusion.
We are one America, folks, all sexes, all races, all
creeds, and identity politics is dividing us and in many ways
keeps vulnerable communities oppressed through perceived
grievances and resentment.
The American dream has produced prosperity and liberty,
without a doubt, but some here maintain that it has increased
inequality, and we are seeing the consequences of that right
now all across this great land and Nation of ours.
My earnest prayer is that we could come together and
effectively address the many issues within our committee's
jurisdiction that are not getting the attention that they
deserve.
I would like to thank you, Madam Chair, and I will yield
back.
Ms. Norton. The gentleman yields back.
This is an oversight hearing, and we have an obligation to
do oversight, especially since we have just passed one of the
few bills that has passed this time, which has been the
transportation infrastructure bill.
I am pleased to recognize Representative Hank Johnson.
Mr. Johnson of Georgia. Thank you, Madam Chair.
This country was born out of the soil of racism. Slavery is
what built this country, free labor off the backs of Black
people. For 250 years, Black people were enslaved in this
country, and then for 100 years thereafter we had Jim Crow
apartheid imposed upon us.
And then to say that in the 400-year history, 401-year
history we should now consider Black businesses to compete on
the same playing field, starting from the same starting point
as White businesses, some of which have been in existence in
this country, you know, for 200, 300 years; to say that those
Black businesses must compete with those White businesses from
a level playing field, it is impossible.
And that is why affirmative action has always been
necessary, and as it was said earlier today, if you have got
high blood pressure and you take medication for it, just
because your medication has produced equilibrium, that does not
mean that you stop taking the medication.
So that is where we are in this country with the DBE
program.
And, Mr. Ali, in response to Congressman Larsen's question,
you revealed some of the specific challenges that airport DBEs
are grappling with to survive during the ongoing COVID-19
pandemic.
Are there any other challenges that minority airport
concessionaires currently face that you want to bring to our
attention?
And are there any foreseeable challenges that DBEs are
likely to face as they seek to compete in a post-pandemic
recovery?
Mr. Ali. Yes, I thank you, Congressman.
I think it is important that we either focus on the short-
term issues of the underwriting requirements, and so the
constraints of what is making the private sector investment in
these public assets. I mean, you do not have the same type of
collateral.
You cannot pledge the same kind of assets. You cannot give
people the same sort of security interest in the underlying
assets of your business when you are doing this work.
And so the crippling effect of there is a quote that when
one community gets a cold, the other one gets pneumonia. I
would say the other one may be getting COVID, and it is a slow
kill.
So it becomes quintessential that in these public-private
partnerships that we are able to find resources like with the
SBA and the EIDL loan program or the Main Street Lending
Program, that there is some attention to not just providing
resources for airports, but providing resources for the ACDBEs
to be able to get maybe MAG abatement--minimal annual
guarantee--fees abated.
Right now there is currently a $3.5 billion proposal in the
Senate bill which will include relief for concessionaires, and
we are hoping that that will be addressed and may be in the
bill for the CR.
Mr. Johnson of Georgia. Thank you.
Ms. Boyer, in your testimony you argued for a national DBE
certification process as opposed to the current process which
adheres to a State-by-State certification process. You contend
that the 50-State certification process serves as an additional
and unnecessary barrier to competition that women- and
minority-owned businesses already face.
Do you have anything else to tell us about the difficulties
that the 50-State DBE certification process poses to your
company's ability to grow and compete?
And do you believe that the 50-State certification process
was put into place as an intentional barrier?
Ms. Boyer. No, I certainly do not think it was an
intentional barrier. Until something is lived, we have no idea
to understand what the challenges are with it.
So I think the program that was put in place was a great
start, but because of the challenges that we have had, it's
just there to light that we do not have the same opportunities
as large companies that are more nimble, that can cross State
lines.
And when we develop a relationship with a large engineering
firm, let's say, that uses our expertise, they want us to be
their partners, and we both together have a better ability to
win projects by moving from State to State.
It is just that they can just move State to State and get a
business license. We have to get a business license and then
start a certification process, and then on top of it we have to
get a prequalification with the State that we are going to.
So just to have that nimbleness of a unified DBE
certification in the 50 States, I think, again, it just takes a
little bit of the challenge away, and any layer of challenge
that we can eliminate just helps all of us.
Mr. Johnson of Georgia. Thank you.
Ms. Williams, your company is certified in many areas, and
one of your strengths has been that you are able to provide
transit market research. In your company's work and research,
have you uncovered disparities in transit availability and
equity that perhaps larger private companies overlook?
And what factors enable DBEs to be uniquely positioned to
provide transit data that most affects underrepresented
communities or communities facing transit inequity?
And would a greater presence of DBEs on transit projects
result in reducing transit inequity in underrepresentative
communities?
Ms. Williams. Wow, that was a tall order. I am going to try
and remember the question.
One of the things you mentioned, transit market research.
So we know that transit agencies typically service 70 percent
of their riders may come from low-income or disadvantaged or
underrepresentative neighborhoods.
What has helped us in the transit market research business
is the ability to go out and talk to these folks, to gather the
information that is necessary for transit systems to make great
decisions on routes and how they are serving the public.
Then a minority firm is doing the market research.
Typically we hire people that look like so. So we are able to
connect.
One of the things that was not mentioned here is on the
IDIQ and task order type contracts, a lot of times what is
happening these days is that you see a lot of these type
contracts where you are included in the team, but your--and I
hear the bell--your number is never pulled.
So you are with a big firm. You are on the team, but
because it is a service order contract, they will just tell you
your services were never required or never came up. And I have
lost a lot of business on just that.
Ms. Norton. The gentleman's time has expired.
I want to call next on Representative Garcia.
Mr. Garcia of California. Thank you, Madam Chair.
I really appreciate the opportunity here. A very important
discussion, obviously. As a business owner myself and my wife a
small business owner, I do understand the value of this and
support the cause.
Just going back to a statement that I believe Ms. Boyer
made, it may have been Ms. Lerdahl made the statement as well.
The frustrations with a formal mentorship program, I have been
in several mentorship programs that are frustrating because
they end up creating more work and more bureaucracy, and it
sometimes slows us down while the intent is to help us speed
up.
I would just encourage a more informal mentorship program
or network of mentors and mentees to where you could connect
folks within industry to help each other out and synergize as
much as possible.
I know that is probably beyond the reach of any one of your
charters or even the DBE's charter, but I think that will pay
off huge dividends if we can figure out how to get these sort
of informal mentorships in motion and make those connections
happen for the various folks.
My question is somewhat along those lines. But do
individual members, do individual business owners have access
to a repository of some sort where there is a list of best
practices or lessons learned from previous engagements or
different agencies and equities that you can point someone in
the right direction and just say, ``Hey, when this type of RFP
comes out with this sort of turnaround time, this is where we
have seen the most success. Contact this agency first, this
agency second''?
I do not know what those solutions would be. You guys
would, but is there a database somewhere or some sort of a
repository that is made available to folks that can tap into
those lessons learned and not make some of the mistakes that we
all have made in the past as we navigate these competitions,
which is what they are?
Is there a place that has the right contact plans, the
right capture plans, and sort of the lessons learned from
several, probably hundreds of different captures?
And I guess, you know, that is directed to Mr. Wainwright,
Ms. Boyer, and Ms. Williams as well.
Mr. Wainwright. Well, I will jump in. I am not sure I am
the perfect person to answer that, but I would think that
organizations like those that are represented here today,
COMTO, AMAC, ACCA, that is where people go every year and
multiple times a year to network with their colleagues, to
share those ideas they have, certification levels for their own
people as their trainers get better and better at what they
know.
And I am sure Ms. Williams and Mr. Ali can speak more to
that, but that would be probably the first place I would think
where that kind of institutional knowledge is deposited.
Mr. Garcia of California. And before you jump in, guys, I
think my question is: is it memorialized somewhere? Is it a
link or a database somewhere that folks can access and get sort
of the uniformity of it, but also the consistency and making
sure that everything is actually memorialized?
Mr. Wainwright. That I do not know. My guess is it comes
and I know in my experience with those associations, every
annual meeting I go to I come away with reams of good, solid
information that I did not have before.
Whether it is easy to get to as a link, I doubt, but Ms.
Williams and Mr. Ali may know better about that,
Representative.
Thank you.
Ms. Williams. This is Eve Williams.
In regard to COMTO, as you said, Mr. Wainwright, there is a
tremendous amount of outreach [inaudible].
A database of sorts that might [inaudible], with APTA,
which is the American Public Transportation Association, is to
develop such a database, and we have talked about it a number
of times and to become more of a free source for small and
disadvantaged businesses so they can reach us and get
information on how to do certain things.
This is the type of work that comes for people to actually
have. They are so difficult to [inaudible], and until somebody
comes up with a question that is typically not an answer, but
an app that we did not have, industry standards and [inaudible]
have a lot of things that are available to our members, as well
as COMTO.
Mr. Garcia of California. OK. Thank you.
I see I am out of time. I yield back, Madam Chair.
Ms. Norton. Thank you very much.
We will hear next from Representative Maloney.
Representative Maloney, are you muted?
[No response.]
Ms. Norton. We will pass on then to Representative
Brownley.
Representative Brownley, are you muted?
[No response.]
Ms. Norton. Then we will go to Representative Payne.
Mr. Payne. Thank you, Madam Chair.
Before I start, I cannot help but comment on one of my
colleagues, two gentlemen prior to me on the other side of the
aisle representing identity politics.
Well, on a topic such as this, and I appreciate the
chairwoman pointing out our oversight duties, which is the
bottom line, it just appears that one of the reasons that we
are in the situation are statements and opinions such as that.
So the good ol' boys network is still in place.
Mr. Ali, what tools does the Airport Minority Advisory
Council organization use [inaudible] from airports on the
runway side and the horizontal-vertical side of civil builders?
[Inaudible] airports?
Ms. Norton. I am not sure that the question was received.
Do you receive the question? Part of it was----
Mr. Ali. No, ma'am, I could not receive the question.
Ms. Norton. Could I ask Representative Payne to repeat the
question?
Representative Payne, part of the question was not heard by
us or by the gentleman you asked to respond. So could you
repeat your question again?
You may be muted. Could you unmute, Representative Payne?
Mr. Payne. Is that better?
Ms. Norton. Yes.
Mr. Payne. Oh, I am sorry. I am so sorry.
Mr. Ali, what tools does the Airport Minority Advisory
Council use to get more DBE contractors ready for work at
airports on the air runway side and the horizontal and vertical
side of civil builders?
Can the Federal Government play a stronger role in
developing more industry contractors at airports?
Mr. Ali. I thank you, Congressman.
Before COVID, we had lots of training and development that
we did face to face at our annual conference when we talked
around service delivery as well on the construction side and
the service side.
During the pandemic side, we have moved to webinars to be
able to facilitate some of that training. As you can imagine,
certain contracts in construction are for the DBE program, but
a lot of that is your social networks.
And so social networks and business allow for people to
participate more readily than others. So we recognize that. So
we try to make sure we do matchmaking with the larger
contractors with the people that we may have in our database so
they can have some great opportunities.
We also have regional directors throughout the country so
that it can align and find themselves to do more partnerships
with that.
And then as you continue to move forward, I think if you
were looking at ways for the Federal Government to create
policies that would be important or impactful is how do we look
at PFCs in the future.
As we know, a lot of the funding has moved from AIP funding
to PFC funding, is to ensure that the DBE regulation as you go
forward will have or also include PFC dollars. As many people
can tell you here, the AIP dollars or airport improvement
dollars have the DBE program. The PFCs, which is the passenger
facility charges, do not have the DBE grant assurances.
So as a result, I believe, you will start seeing a
diminishing of utilization of DBEs.
Mr. Payne. OK. Thank you.
Mr. McDonald, we have heard positive things about Broward
County's funded capital construction program. What type of
success have you had with providing work to local DBE firms?
And can your program plan be implemented in other areas?
[Interruption to audio.]
Ms. Norton. Thank you.
Continue please.
Mr. Payne. Thank you.
Mr. McDonald, should MWDBE participation in your program
require third party determination and signoff before majority
primes sign contracts with DBE inclusion?
Mr. McDonald. Thank you, Congressman, for that question.
Yes. Our program can be duplicated. Again, running an
economic development and a small business office and
administering the Federal program, we understand the importance
from my local small businesses all the way to my DBEs where
they need the additional assistance.
So one of the things we do, similar to what Mr. Ali just
shared, we do as many meet and greets, whether purchasing does
pre-bids or not.
During COVID and pre-COVID, we did pre-meetings or what we
call meet and greets as possible, for sure, that from an agency
perspective, we speak to the DBEs about all of the
opportunities that are on the route.
From potential prime perspective, we call them in as
potential primes and explain the program and the expectations
of the office.
As mentioned earlier to one of the speakers, we actually do
have a requirement as a part of that LOI, whoever you submit
you are married to unless it goes through a process of my
office and my final signature that there is a reason to
substitute.
So it is the idea that the program tries to enforce exactly
what 49 CFR requires us to do. It is the idea that I do have
the support of the county commission, the county administrator,
and my agency that support the bid all the way to the
utilizations of the primes.
And we do believe that as a model--and nothing is perfect,
I am not acting as if it is--there is an opportunity to empower
primes to recognize that this requirement is one that we also
want, as you have heard, to develop and nurture those
relationships.
Mr. Payne. OK.
Mr. McDonald. We were given an [inaudible] a few years ago
to not set a goal just to see. I refused. I knew that without
the goal they would not do it.
So we are crystal clear. I just had a primes meeting last
month--a virtual--to let them know that this is not only a
requirement. It is also monitored and reported, and we will act
on it.
So it really requires us to do what the law allows us to
do.
Mr. Payne. Thank you very much.
And, Madam Chair, I yield back.
Ms. Norton. The gentleman's time has expired. I thank you.
Representative Palmer.
Mr. Palmer. Thank you, Madam Chairman.
Ms. Boyer, in 2013, the Office of Inspector General issued
a report saying that there were DBE firms that were
deliberately limiting the amount of new contract dollars in
order to stay eligible for the program.
Do you think that that is harmful to those programs?
And I will explain why I asked this in a moment.
Is she still there?
Ms. Boyer. Yes. Yes, I am.
I do think it is harmful to the program. I believe that the
program is about empowering firms to get a leg up, get a start,
get a lot of experience, and be able to step out and perform on
a level playing field.
I think it is the fear that overcomes a small business to
step out because it is that, you know, we hear so often that if
there is not a DBE goal, then we are going to do it ourselves.
So I think it is a fear, and I just think there needs to be
more of a ladder in between.
Mr. Palmer. Well, the reason I bring this up and the
possibility that there needs to be some term limits for how
long you can stay in the program is you made another point
earlier about lacking the nimbleness that larger firms have.
And is that not largely a function of resources, your
undercapitalized cash flow issues, that you do not have the
nimbleness that the other firms have?
Ms. Boyer. Yes, certainly. I mean, it is nimbleness when it
comes to being able to move to opportunities. I think within
our company, we are actually were able to move fairly quickly,
but we are mostly undercapitalized. It is very difficult to get
capital, and it takes years and years.
So my company is only 16 years old. So it takes years and
years to get to a point where you can sustain yourself.
Mr. Palmer. My point about this is that I am kind of odd in
my reading choices. Where some people read novels, I tend to
read reports.
But there was a report from the Federal Reserve Bank, I
think one from St. Louis and one from Atlanta, that talked
about how minority-owned and women-owned businesses are
undercapitalized.
And one of the things that I think we need to do to address
this situation is to follow on what President Trump has done
with the Opportunity Zones and maybe do a broader version of
that that incentivizes financial institutions to work with
minority-owned and women-owned businesses to help them to get
to a stronger position in terms of available capital, which
will help address this nimbleness issue that you raised.
But I think it is also important in the DBE program that we
not incentivize companies that are in that program to stay in
that program because you will never grow. And I would just like
your thoughts on that and maybe Mr. Wainwright weigh in on that
as well.
Ms. Boyer. Sure. So I mean, it would help to have the
financial institutions more onboard in helping minority- and
women-owned businesses. I mean, it is definitely something that
holds most people back.
For me, our company always kids that we are in the basement
of the bank. They always ask, ``Is there a man that is involved
in your decisionmaking?''
And, we have been building a successful business and doing
well being run by women. So I think it would help.
Mr. Palmer. And your answer is you don't need no stinking
man?
Ms. Boyer [Laughter.] In collaboration and, yes, in
support.
Mr. Palmer. You just need a good banker.
Ms. Boyer. And good bankers are hard to find for women and
minorities. I mean, we know the banking industry. It is always
a challenge. It really is.
Right now I am using a very small bank from my hometown,
not even in the State that I am working in. Because of the
personal relationships, they know my family. They know my
brothers and sisters, and they trust me.
Mr. Palmer. Madam Chairman, I know we are in the midst of a
highly partisan election, but I think what we need to at least
give some credit to the Trump administration on the Opportunity
Zones, and we need to think about how we expand this to make
more capital available to minority-owned and women-owned
businesses.
And I would recommend that our colleagues look at these
reports from the Federal Reserve Banks and start thinking about
how at some point we work together to address this.
And I yield back.
Ms. Norton. I thank the gentleman for his suggestion, and
as he notes, this is a very bipartisan committee, and this
issue is very bipartisan. So I believe the chairman will take
note of what you have asked astutely.
Representative Plaskett.
Are you muted, Representative Plaskett, who is next?
[No response.]
Ms. Norton. Then we will move to Representative Carbajal.
Mr. Carbajal. Thank you, Madam Chair.
Dr. Wainwright, today we have heard business owners tell us
they believe discrimination would prevent them from being
successful in business in the absence of this program.
Statistical analysis can shed further light on the question by
comparing situations where a DBE program is in effect with
situations in the same jurisdiction the program is not in
effect.
Do you agree and do you believe doing that provides useful
evidence?
And if so, what does the evidence you have reviewed
demonstrate?
Mr. Wainwright. Thank you, Representative.
We have heard from Ms. Lerdahl about what has happened in
Washington DOT. The overwhelming majority of examples of so-
called parity that I am familiar with are quite recent, and as
some DBE programs have matured and programs like them.
In my experience they are rarely statistically significant,
which means they do not necessarily show parity at all, which
is what we learned with the subsequent disparity study that was
performed by Washington DOT, despite U.S. DOT ignoring those
results when the request to rescind the waiver came in.
But second, these results in the rare instances that they
occur are statistically significant in the context in which
availability figures have been artificially depressed due to
discrimination.
You remember I testified that minority- and women-owned
firms are forming at much lower rates than similarly situated
majority firms because of discrimination. If such firms were
forming at the same rate as majority male firms, there would be
few, if any, findings of parity.
Third, you really should not consider a category of DBE to
have achieved parity until you have seen the same result appear
consistently in the private sector, that is, in the census
data.
Again, this is like the blood pressure metaphor I have used
previously.
Remember the only markets in which there has been any
attempt to level the playing field are the public contracting
markets, like the federally assisted transportation market.
And the far larger and more lucrative private sector DBE
programs are rare to nonexistent, and majority male-owned firms
generally get almost all of the business.
We also have to remember that majority male-owned firms
have literally had centuries to grow and establish their firms
with effectively zero competition from minorities and women.
Early on, the lack of competition was a direct result of
laws that intentionally and explicitly disadvantaged women and
minorities. Later it was the result of discriminatory practices
that were permitted to continue despite civil rights laws.
Finally, we should consider the practical effects of
suspending the operation of the program every time some
subcategory of program participant achieves a modicum of
success. This will not reduce discrimination. It will just tend
to increase bankruptcies, as we have heard so poignantly from
Ms. Lerdahl, and then those same entrepreneurs or others like
them will need to be added right back into the program.
Thank you.
Mr. Carbajal. Thank you.
Dr. Wainwright, this committee has received reports that
some State and local transportation agencies have excluded
certain minority ethnic or gender groups from their programs
because these groups have finally reached or exceeded, quote,
unquote, ``parity'' according to a disparity study.
Do you believe excluding from the program certain groups
who reach some measure of parity in the market is the right
approach?
Mr. Wainwright. No, it is not, and I believe that was what
I just addressed in my previous response. So maybe I
misunderstood your initial question.
Mr. Carbajal. Thank you.
I have limited time. So, Ms. Lerdahl, you stated in your
testimony that after being excluded from the DBE program, you
bid on several contracts, but were unsuccessful.
To your knowledge, did those contracts go to other DBEs?
Ms. Lerdahl. Thank you, Representative, for the question.
No, absolutely not. They went to large electrical companies
that were not DBE firms, and in fact, our experience in the
State of Washington was when the waiver was enacted, prior to
that, the DBE community had about 17 percent participation, and
after the waiver was enacted, that fell to about 8 percent or
8\1/2\ percent participation, approximately.
So those DBE dollars did not go to other DBE firms. They
actually went to the prime contractors who self-performed that
work.
Mr. Carbajal. Thank you very much.
Madam Chair, I yield back.
Ms. Norton. Thank you very much.
Representative Graves, and thank you, Representative
Carbajal. We now go to Representative Graves.
Mr. Graves of Louisiana. Thank you. Thank you, Madam Chair.
Witnesses, I want to thank you very much for your testimony
and participation today.
My first question is for Mr. Ali.
Mr. Ali, in the 2018 FAA reauthorization bill, we changed
the size standard for DBEs in the legislation in regard to FAA
DBE participation. I am just curious if you have any reflection
or reaction to that law change and how it might have caused an
impact on DBE contracts within the aviation space.
Mr. Ali. Yes, I think it was good that we had, in regard to
that position, when you start looking at it, we had to have the
size to equal the SBA. I mean, that helped with DBEs because
some of the size standards were not working. They were not
equivalent.
So we really appreciate what the committee has done and
argued for this inclusion of this kind in the Moving Forward
Act we thought.
Mr. Graves of Louisiana. Thank you.
I want to first ask Mr. McDonald and perhaps Ms. Norman.
Our State department of transportation in Louisiana has
indicated that some of their success in growing DBE
participation has been the result of these community
partnerships that they have helped to establish and sort of
create a larger market within the DBE community for some of the
contractors to be able to hit their DBE goals.
Have you all established any type of partnerships or any
other strategies that have resulted in increasing DBE
participation?
Mr. McDonald. I would say that we have, and as I mentioned
earlier, the idea that we extend that same olive branch to our
primes that I do with my DBEs. I actually hold virtual
workshops now during COVID, but prior, meet and greets with the
primes to make sure that they understand the county's program,
that they understand the Federal program; they understand our
expectations.
And certainly, we want to entertain any questions or
concerns they may have historically had with our DBEs. We also
then do the same with the primes and the DBEs.
The model I am trying to describe is that the more we know
about the project price, the more we extend the information to
the DBE community as well as the prime community before the bid
ever comes out helps to build the relationship so that they
understand the county is serious about the Federal program.
We are going to adhere to the 49 CFR regulations, and that
is not against the prime. That just makes sure that the prime
understands that it's a commitment for our great economy to use
our minorities and women and, yes, to allow our minorities and
women as DBEs to get in front of our primes early for the pre-
qualifiers.
So that's one of the things that we do on a regular basis
to try to assure that who the primary themselves who have the
DBE, they maintain them and also to let us know that we are
having challenges with our DBE so that we can continue to try
to develop them.
So we do the collaboration regularly.
Mr. Graves of Louisiana. Thank you. Thank you. I appreciate
that.
Ms. Norman, I don't know if there is anything you wanted to
add.
Ms. Norman. Yes, same here. We do our collaboration
opportunities with our primes.
We also have what we call the TDAC. It is the DBEs, our
Transportation DBE Advisory Committee. It is where the DBEs
come together along with the primes. They have their president,
their vice president, secretary, and treasurer. We meet
quarterly.
Out of that they build relationships. Every year we hold
what we call a DBE symposium, where we bring in primes, where
we bring in DBEs who have graduated from the program.
We also have, as you enter the workshop, we have what we
call a matchmaking event so that we can match some of the DBEs
with the primes, some of the scope of work opportunities, and
so we do that often.
We also seek out, as someone talked about earlier,
mentorship programs, partnering with large firms like within
the tolling industry where there are not a lot of DBEs who have
that skill set; partnering with those kinds of agencies to
build the capacity for our DBE firms.
So it is about partnership, and it is about collaboration.
Mr. Graves of Louisiana. Thank you, Ms. Norman. Thank you
and Mr. McDonald.
The last question, I am going to kind of bring those two
together. So years ago I ran a large infrastructure program,
and often we would meet with DBEs that wanted more work.
The type of work that we did in some cases was a very
specialized area, and so we would be sitting there with
contracts of tens of millions or maybe even hundreds of
millions of dollars, and as you can understand, somewhat
cautious or concerned about giving a contract to a firm that
maybe does not have that resume or that portfolio of expertise
in the field.
You have both talked about partnerships and mentoring
programs. So on the one hand, we have eliminated the gross
receipts cap in the FAA, the H.R. 2. The highway bill that is
moving through also eliminates that nearly $24 million gross
receipts cap.
I am trying to figure out how do you strike that right
balance of not giving contracts to folks that do not have the
right expertise, but at the same time do not allow these huge
contracts to slide in under a DBE label whenever they are
taking work from smaller businesses.
Ms. Boyer, do you want to comment on that at all?
Ms. Boyer. I think one of the things that we have done in
Illinois for the Illinois Department of Transportation is we do
a lot of teaming between small firms and large firms, and that
seems to really work well. It gives the small firms the ability
to lead the project, but it has the support of the larger firms
that have the breadth of experience and really a workforce that
can help us out when we need the extra manpower.
So I think joint mentoring and teaming opportunities
between prime and DBE firms is really important, and I think it
is a way to advance us all because what it also does is the
prime firm learns or the bigger firm learns how to be a sub.
They learn that information needs to flow up and down, and
sometimes if they never have the opportunity to work as a
subconsultant or a subcontractor, they never understand the
importance of passing on information in a timely manner.
They do not even have any idea what it is like to be a DBE
firm. So I think overall it strengthens the entire industry.
Mr. Graves of Louisiana. Thank you very much. I appreciate
it.
I yield back, Ms. Chair.
Ms. Norton. I thank the gentleman for his question.
Representative Stanton.
Mr. Stanton. Thank you very much, Madam Chair. Thank you
for holding this important hearing.
Thank you to the witnesses for being here.
As people on the committee know, I am a new Member to
Congress. My former job was mayor of a large city, mayor of the
city of Phoenix, and I am a huge fan of the DBE program.
I witnessed with my own eyes when we were lucky enough to
do a large infrastructure program at our airport or advanced
light rail in my city or build a water treatment plant the
opportunity to get businesses, often small businesses led by
women, led by people of color, an opportunity to get a portion
of that work and see them build their companies, grow
employment, build their own wealth.
It is really great for the city, and a benefit of this
program also that I witnessed over and over again is that the
DBE firm leadership often would become the leadership of the
city. As those companies grew in size and importance in our
community, I would tap the leadership of those companies for
important boards and commissions or nonprofit board seats, et
cetera.
They tend to be some of the most civically active business
leaders in a community. The DBE program is critically important
to opening the door for small businesses owned by socially and
economically disadvantaged individuals to compete for important
federally funded projects.
Today I want to highlight just one DBE success story in
Arizona. Arizona Heat Contracting, a woman-owned DBE company,
had only one contract with our State DOT prior to joining the
South Mountain Freeway Team, the largest project to date in
Arizona at almost $2 billion. The company was contracted to
perform trucking activities on this new 22-mile freeway.
The original contract was for $25,000. That was just the
start. The company did well and kept growing and growing, got
in new contracts, ultimately got contracts valued up to $9
million, and then they were able to subcontract with over 81
DBE and non-DBE trucking firms to assist in delivering the main
portion of the project's trucking needs.
That is a great success story. They were successful in
maintaining ownership and control of the trucking operations on
a project which had an aggressive schedule and many
requirements.
Arizona Heat was able to quickly adapt to take the
necessary steps in a very short period of time in order to
sustain the needs of the project and increase its capacity.
I mean, that story has played out over and over and over
again in communities throughout this country. It is just one
example of many successful DBE programs in my State and has
been in so many other States.
I have a question for Ms. Williams.
Ms. Williams, the committee recently enacted a provision
which was included in H.R. 2, the Moving Forward Act, to remove
the gross receipts cap under the DBE provisions applicable to
the Surface Transportation Program.
If enacted, certified DBEs would be eligible to participate
in federally funded highway and transit projects based upon
their Small Business Administration size standard, as is the
case in the aviation DBE program.
Ms. Williams, how would such a change benefit certified
DBEs seeking to participate on highway and transit projects?
Ms. Williams. Thank you. That is a great question.
I think it will help if those caps were lifted. However,
many times the problems for graduating or the problem existed
that pushes people out of the program is not the cap on gross
receipts. It is the cap on personal net worth.
If I do not have the personal net worth to go after a $24
million project, then it does not behoove me to go after it. I
do not have the resources to fund it.
And so I think a greater emphasis should be put on looking
at the personal net worth cap as well.
Mr. Stanton. All right. You have given this committee a lot
of food for thought with that good advice. I appreciate that,
Ms. Williams.
Mr. Ali, how has participation in the DBE and ACDBE
programs made AMAC members more competitive outside of the DBE
program?
Mr. Ali. Yes, thank you for the question.
What we found, as you heard earlier, the joint ventures
that you heard from Ms. Boyer, those joint ventures and those
teaming arrangements, that you have seen that happen more
often, and as a result, they have been able to take some of
those partnerships outside of the airport industry into other
transportation industries as well as into the private industry,
which allows them to build relationships.
We should never forget business is done with people in
business with people you know, people you like, and people you
trust. And that is really done in this space where you get
people to engage.
So the DBE program kind of helps to align for some of that,
particularly since there has been so much discrimination in the
past, that this provides a way for people to partner and grow
and learn to work and build together so they can do exactly
what you said. People get to know who they are and be able to
put them on board commissions together.
Mr. Stanton. Thank you, Mr. Ali.
Thank you, Madam Chair. It has been an excellent, excellent
hearing. I yield back.
Ms. Norton. I thank the gentleman.
Representative Fletcher. Representative Fletcher.
Mrs. Fletcher. Yes. Thank you, Chairwoman, and thank you
and also Ranking Member Graves and Chairman DeFazio for holding
the hearing today.
Thank you so much to the witnesses for taking the time to
testify. Your stories have been very powerful.
I also want to thank my colleagues for their thoughtful
questions and their ongoing support of the important work we
are doing here today, especially Mr. Johnson from Georgia, who
reminded us all why this program exists and why it matters.
As we have heard, the DOT Disadvantaged Business Enterprise
program is an important program created to ensure that
minority- and women-owned businesses have a fair chance to
compete for Federal DOT funds, a program that has historical
roots that, as we have heard from our witnesses, is very much
needed today.
For more than 40 years, the program has opened access to
small businesses across the country who would otherwise not be
able to compete for many of these projects, and we have seen
the results in my hometown, for example.
Thanks to this program, more than 30 percent of both George
Bush Intercontinental Airport and William P. Hobby Airport
contracting and concessions goes to ACDBEs.
But as we have heard today, the committee has an important
role in ensuring that the marketplace for DOT-assisted
contracts is free from artificial and discriminatory barriers
for women- and minority-owned businesses who wish to compete on
a level playing field.
So I want to use my time here today to follow up on a few
questions that some of my colleagues have already asked, and I
actually want to start with Ms. Williams.
In your opening statement, I think the end of your opening
statement was interrupted, and so I would like to give you the
opportunity to just repeat the concluding sentence, the thing
that you wanted to say in conclusion of your opening remarks.
Ms. Williams. Well, thank you so much.
I will repeat that. So in conclusion, I wanted to say that
the program is not a handout. It is a leg up. It forces big
companies and public transit agencies or public transportation
authorities to do business with minority companies.
Without the DBE program, we would probably be out of
business at the end of the life cycle of our contracts that are
in the pipeline.
And my last statement there was that we need to be
protected like we protected the bald eagle.
Mrs. Fletcher. Well, thank you so much, Ms. Williams. I did
want to hear you full statement, and I want to follow up with
you on a particular question kind of following up on what
Chairman DeFazio was asking in his questions to Dr. Wainwright
about public versus private projects.
Can you share with us kind of the percentage of your work
or your revenues that comes from public versus private
projects?
And talk about kind of the effect of the DBE program,
public versus private, and how that might help particularly in
the bidding process in Dallas, but also more generally.
Ms. Williams. Private work is null. We have probably done a
few private projects in the past. They tend not to come
frequent enough to sustain us, and they also come with other
issues that we do not face when we do public work, like getting
paid. That is important.
As far as the contracts that we do have in the public
sector, those have been our lifeline. I think that without
those projects, we would not be in business. We just simply
would not because we depend on the DBE program.
Would I like to graduate? I would, but as others have
mentioned, it is frightening because I know what happens when
you pull the covers back.
I think sustainability is really important, and
sustainability happens when there is continuity between
projects, when you are able to retain staff between projects,
when the team you have worked with is continuing on to another
project together.
And so there is a lack of continuity, and what happens is
you are forced to lose your resources because you cannot sit
them on a bench. And so this cycle just starts over and over
and over again.
Thank you.
Mrs. Fletcher. Thank you very much, Ms. Williams.
And I want to use the remaining time that I have, which is
not a lot, to direct a question to Dr. Wainwright.
In your testimony, you stated that statistically
significant disparities facing minority-owned and women-owned
businesses persist to this day, according to research, and
looking at the disparities, what gaps do you feel your research
reveals where the DBE program could be used to further reduce
the existing and currently present disparities?
Mr. Wainwright. I want to make sure I understand your
question, Representative. Is it what more could the DBE program
be doing?
Mrs. Fletcher. Yes. I mean, does your research reveal gaps
where the DBE program could be used to further reduce the
continuing and existing disparities?
And very quickly. I think I have gone over my time here.
Mr. Wainwright. Yes. It is kind of a policy question, a
little bit out of my wheelhouse. I guess I would say quickly,
seeing these programs, there are still a lot of cities and
counties and States around the country that do not run
comparable programs, and it would be nice, and as one of them I
would say also within the Federal Government outside U.S. DOT.
So it would be good to see a more consistent and widespread
effort to promote contracting diversity in the public sector
and, of course, to see that spill over into the private sector.
Ms. Norton. I thank the gentleman.
Mrs. Fletcher. Thank you very much, Dr. Wainwright, and
Madam Chairwoman, I yield back.
Ms. Norton. I thank the gentlelady for her question.
Representative Espaillat.
Representative Espaillat, are you muted?
Mr. Espaillat. Yes, I am here.
Ms. Norton. All right.
Mr. Espaillat. How are you?
Ms. Norton. Go ahead.
Mr. Espaillat. Yes. Thank you, Madam Chair, and thank you
to all the panelists for being here.
This is an incredibly important hearing. I am grateful to
come from a State and a city like New York which has programs
in the transportation and construction sector that go well
beyond the requirements of disadvantaged business enterprises.
But there are so many underlying issues that I believe we need
to address.
Last year I held a meeting with my local Transportation
Task Force to discuss better inclusion of DBEs. I have had our
local contractors association provide us a thorough examination
to a number of community groups and leaders so they could
ensure small businesses in the city have a good sense of how
the DBE program works.
One of the biggest take-aways from the meeting was that
even though New York is full of diversity and has very
aggressive diversity goals, there is still a pipeline issue in
the construction sector.
That is why I am working closely with former congressman
Charlie Rangel and City College of New York to develop a state-
of-the-art infrastructure training program because we feel that
there is just not enough young people particularly ready for
the potential jobs that may be coming towards the future.
So I believe that as we invest in infrastructure, we also
need to invest in training the diverse field of candidates for
the jobs that will come along the way.
Another issue has been brought to my attention is the NAICS
issue. The NAICS size standard negatively impacts the ability
of DBEs to grow.
So I want to ask the panelists: have you faced similar
issues?
Do you believe that changes need to be made to the INVEST
in America Act to sufficiently resolve these issues?
And is there more that we can do to ensure that DBEs are
not held back?
Any of the panelists.
Ms. Williams. This is Eve Williams.
I would like to address the NAICS standards on senior
[inaudible] architectural services, and it puzzles me as to why
engineering [inaudible] service. The engineering cap on gross
revenue is somewhere near $14 million over an average 3-year
period, but yet engineering architecture services are near $7
million.
I think in speaking for the architects, I think that they
are severely held back because of the NAICS code standards or
cap on just architectural services.
Mr. Ali. Yes, this is Farad Ali from AMAC.
I would say that there needs to be some real evaluation of
what Ms. Williams was talking about earlier, which is personal
net worth. I think it is unreasonable to believe. I think you
create some kind of economic discrimination by keeping the
number so low and then expect for businesses to, quote,
unquote, ``graduate'' or to ``perform better.''
It is hard to continue to have a small net worth and expect
that people can grow to $30 million or $40 million or $15
million. I mean, it is almost unreasonable.
That is the problem that we ran into in the car rental
industry because you have got a $1.3 million net worth
requirement, net standard, that means you cannot have over
that, but yet you have the cars.
If you wanted to be a dealer for rental cars when you have
got $50 million of rental cars, if you only have a net worth of
$1.3 million, you could not even get a contract to do that
work.
So I think there should be some real intensive studies on
understanding the impact of keeping the net worth at its
current level and how that has also created some economic
discrimination until you start really raising that so people
can have growth and share in the prosperity.
Mr. Espaillat. Anything on the pipeline issue from anybody
or do you find that there are not enough trained folks for the
jobs that may be coming our way in the future?
And what can we do about it?
Mr. McDonald. No, the pipeline actually is an issue, and
you are absolutely correct.
So we are working here within our State and with our county
to expand our apprenticeship program in addition to what we are
trying to do to prepare for DBEs.
As the county we, too, just decided that we are going to
align our own county procurement with apprenticeship, requiring
primes to use a percentage of their activity with the contracts
they win from the county to be done with apprenticeship.
So we are believing that we are going to able to grow that
in a similar manner over with the DBE, but the pipeline is an
issue that we are trying to address right now because we do not
have disciplines as we go forward and infrastructure begins to
grow and bloom as opportunities for small businesses.
Mr. Espaillat. Thank you, Madam Chair. I yield back.
Ms. Norton. I thank the gentleman for his question.
Representative Garcia? Representative Garcia? Are you muted
or are you present?
[No response.]
Ms. Norton. Then I am going to move on to Representative
Cohen.
Representative Cohen, are you muted?
[No response.]
Ms. Norton. Then the last Member who has not been heard is
Representative Carson.
Representative Carson, are you muted?
[No response.]
Ms. Norton. I want to thank all of the witnesses for their
testimony today. I think this hearing has been very telling and
essential.
It was particularly essential this year when we are seeing
demonstrations over racial discrimination. It is one thing to
demonstrate to take down a Confederate statute that was erected
decades ago and be successful at that.
It is quite another thing to make sure to raise up the
ability of minorities and women to participate in Government
programs.
That is an issue for today and in keeping with the kinds of
reckoning that are happening in our country.
The comments of our witnesses today have been very helpful.
They will be taken into consideration, especially your comments
calling for changes in the statute itself.
I want to thank each of the witnesses for your testimony,
your very informative and helpful testimony.
I ask unanimous consent that the record of today's hearing
remain open until such time as our witnesses have provided
answers to any questions that may be submitted to them in
writing.
I also ask unanimous consent that the record remain open
for 15 days for any additional comments and information
submitted by Members or witnesses to be included in the record
of the day's hearing.
Without objection, so ordered.
If no other Members have anything to add, the committee
stands adjourned.
Thank you very much.
[Whereupon, at 1 p.m., the committee was adjourned.]
Submissions for the Record
----------
Prepared Statement of Hon. Eddie Bernice Johnson, a Representative in
Congress from the State of Texas
Almost four decades ago, the Disadvantaged Business Enterprise
program was enacted to address the stubborn and harmful
institutionalized bias and systemic racism people of color were facing
in the transportation industry. Since its enactment, the program has
made progress, but that progress has been far too slow. This committee
has collected enormous amounts of evidence that illustrates just how
difficult it is for DBEs to succeed in today's environment. The bottom
line is that DBEs must fight twice as hard and still usually end up
getting far less money than goes to firms owned by non-minority males.
Discrimination greatly increases the difficulty for women and
minority owned firms to succeed. A recently published disparity study
conducted for the Texas Department of Transportation used Census data
to examine this issue. The study found that the business formation rate
for white males was 5.4 percent, but the rate for African Americans was
less than a third of that--1.6 percent. For Hispanic Americans it was 2
percent, for Native Americans it was 2.9 percent, and for white women
it was 3.1 percent. For Asian/Pacific Islanders it was better--5.2
percent but still lower than for white males.\1\
---------------------------------------------------------------------------
\1\ Texas Department of Transportation Disparity Study 2019,
Colette Holt & Associates, 2019, at 133.
---------------------------------------------------------------------------
The disparities for firm formation in construction in Texas were
even worse. White men formed construction firms at a rate of 10.3
percent, but for Asian/Pacific Islanders the rate was only 9.5 percent.
For white women it was 8.9 percent. Shockingly the construction firm
formation rates for Native Americans, Hispanic Americans and African
Americans were 4.9 percent, 3.5 percent and 2.9 percent respectively.
Think about what this means--as bad as the economic disparities are
for firms owned by minorities and women, the current data actually
understates the problem, since it doesn't take into consideration all
the firms that could never even get off the ground. How can minorities
and women ever erase the gaps in business inequality if discrimination
keeps them from even forming the businesses they need to compete?
This is exactly what makes the DBE program so important--while it
doesn't fully level the playing field, it provides a demand for
businesses owned by minorities and women and gives those businesses
that do exist at least a fighting chance to compete.
It is my hope that this hearing today will help us better
understand the importance of this program along with the areas where
this program can be improved upon. I look forward to hearing from our
witnesses. Thank you.
Prepared Statement of Hon. Rick Larsen, a Representative in Congress
from the State of Washington, and Chairman, Subcommittee on Aviation
Thank you, Chair DeFazio and Subcommittee Chair Norton, for holding
today's hearing on the importance of the U.S. Department of
Transportation's Disadvantaged Business Enterprise (DBE) Program.
Women and minority-owned businesses are fundamental to economic
growth in Northwest Washington and the success of U.S. transportation.
I saw this firsthand when I met with Marques Warren of Warren's
News and Gifts at SeaTac Airport in Seattle.
Marques' father, Ardie Warren, opened the family's first store,
Northwest Encounter, at SeaTac in 1994. The news and gift store has now
grown to 18 locations in the airport in partnership with the Hudson
Group.
To launch their business, the Warrens depended on Airport
Concessions Disadvantaged Business Enterprise (ACDBE) loans, which help
level the playing field for airport concessionaires.
The needs of U.S. transportation industry are as diverse as the
passengers it serves.
Congress must work to improve equity in the industry and increase
economic opportunity for women and minority business owners.
One of the ways Congress can support these efforts is through
preserving and improving the Disadvantaged Business Enterprise (DBE)
Program.
According to the American Community Survey, women and minorities
significantly establish fewer businesses and earn less from those
businesses than their white male counterparts.
To address these disparities, the DBE program aims to increase the
participation of women and minority-owned businesses in federally
funded transportation and infrastructure projects.
The Port of Seattle is one example of the DBE program's positive
impact.
According to the Port, DBE firms received more than $4.9 million
for work performed on Federal Aviation Administration (FAA) funded
projects, including taxiway improvements and residential noise
insulation.
The Port's Diversity in Contracting program tripled the number of
women and minority-owned businesses doing business with the Port. Last
year, the program met its five-year goal of increasing the amount of
spend on these contracts to 15 percent.
The DBE program is key to improving economic opportunity for small
businesses in U.S. transportation, but Congress can do more to meet the
needs of women and minority entrepreneurs.
Last year, the Washington State Department of Transportation
(WSDOT) conducted a disparity study, which found:
Smaller airports want more assistance from the FAA and
WSDOT to increase DBE participation; and
Without the program, DBEs would be effectively shut out
of the market with devastating impacts to these businesses, among other
conclusions.
I look forward to hearing from today's witnesses, including the
Airport Minority Advisory Council (AMAC), regarding the critical need
to continue the DBE program and ways to improve it for women and
minority-owned businesses, particularly in aviation.
Diversity in hiring and contracting is essential to strengthening
the nation's transportation and infrastructure, and to keep the country
competitive in the global market.
Today's witnesses are important partners in these efforts.
Letter of July 13, 2020, from Lawrence T. Green, President, Divine
Cement, Inc., Submitted for the Record by Hon. Peter A. DeFazio
July 13, 2020.
Mr. Peter DeFazio,
Chairman,
House Committee on Transportation and Infrastructure, United States
House of Representatives, Washington, DC.
Re: In Response to the Request from the Committee on Transportation and
Infrastructure for a Letter or Statement on the Disadvantaged Business
Enterprise Program
Dear Chairman DeFazio,
Construction is an area that has historically excluded black
workers. This includes the unionized portion of the industry. Giving
minority workers access to good paying jobs has always been an
important part of closing our large and persistent racial wage
inequities. This is a critical issue that must be addressed and
resolved. Trade unions have had a complicated and often ugly history
with race. That history has helped shut blacks and Hispanics out of
these highly coveted lines of work.
I have worked in the construction industry since the age of
sixteen. I worked as a cement finisher another sixteen years before
starting my own company, Divine Cement, Inc.
The construction trade has always been employment set aside for
predominately Caucasian men. During high school, I remember vividly my
white counterparts landing summer jobs in the trades while my black and
hispanic counterparts worked in the fast food industry or retail such
as clothing and shoe stores at the local mall.
In June 1971 the New York Times wrote, ``The building of houses,
offices and factories, of bridges and dams and highways is still
largely white man's work in America.''
Despite Government-imposed quotas and timetables, despite voluntary
``hometown solutions'' and ``outreach'' programs to train inner-city
youths along with seemingly constant litigation, the number of black
and other minority workers entering the construction industry remains a
thin trickle.
There is some evidence that these efforts have forced open the door
to employment in the construction trades at least a crack. The number
of blacks now entering construction jobs is still insignificant in
terms of their need for employment and higher income. The crack is so
insignificant, light can't shine through.
According to a 2018 Crain's New York Business article, ``In 2015,
the Center for Union Facts, released data on the racial pay disparities
in the construction unions. We noted that only 25% of unionized
construction workers were black, compared with 53% and 43% in the
health care and transportation sectors, respectively. Additionally, we
found white workers were getting better-paid job assignments than
minorities, who often had lower-paying apprenticeships. Fast forward to
current research and those figures confirms there has been little to no
change.''
The reasons for Black invisibility at street construction sites are
racist exclusion, cheap labor, and the refusal of city and county
officials to enforce anti-discrimination labor laws. While the laws are
in place, they are routinely circumvented allowing discrimination to
continue. But most importantly, the reason is racist exclusion and it
starts with the unions. The long history of racial closed doors toward
African Americans in the trades is well-known and documented with
construction at the top of the list. These are the plum paying and plum
benefit jobs in the construction industry. They have long been
jealously guarded as the sole preserve of blue-collar whites as cited
in ``The Hutchinson Report'' by author and political analyst Earl Ofari
Hutchinson.
Some of my personal experiences begin with unfair practice of how
and when mobilization is paid out. When my company is selected as the
subcontractor, we have a significant amount of work to perform and rely
on mobilization monies to purchase equipment and materials to start the
job. We are forced to wait until two weeks prior to the scope of work
starting before being paid mobilization. Often times, we do not receive
mobilization until after the scope of work has begun.
More importantly, we are forced to wait sometimes months after the
general contractor is paid before we receive payment. More times than
not, we are forced to call the general contractor numerous times
requesting we be paid and this is after confirming they have been paid
by the owner. It is extremely frustrating to complete a job on or ahead
of schedule, with complete satisfaction of the general contractor only
to be sent a perceived message of, ``You'll get paid when I feel like
paying you and not a day before!'' It is extremely disheartening.
The DBE Program has enhanced Divine's opportunities in the highway,
transit, and airport construction industries simply by existing. The
consequences of not having the program would be our business would not
exist. But for the Disadvantage Business Enterprise and the
requirements to use minority owned businesses, Divine Cement, Inc.
would not a reality because general contractors would self-perform.
Securing working capital is extremely difficult for minority owned
businesses. Personally, I am repeatedly forced to secure loans with
interest rates that mirror loans from merchant cash advances. While the
interest rates are uncomfortably high, the loans are necessary to make
payroll and purchase the equipment and materials needed to perform the
job in the absence of mobilization.
Our saving grace has been that the consistent superior quality of
work Divine Cement provides has afforded us the opportunity for
additional work. Moreover, additional contracts are awarded after the
realization that Divine Cement's performance surpasses expectation. One
of the visions of Divine is to create a state-of-the-art training
center to equip other minorities to provide a more diverse group of
highly trained and qualified tradesmen thereby opening the door for my
more successful minority owned companies like Divine Cement, Inc.
Sincerely,
Lawrence T. Green,
President, Divine Cement, Inc.
Letter of July 15, 2020, from Linda Moen, P.E., LEED BD+C, President
and Managing Member, EFK Moen, Submitted for the Record by Hon. Peter
A. DeFazio
July 15, 2020.
Hon. Peter DeFazio,
Chair,
House Committee on Transportation and Infrastructure, United States
House of Representatives, Washington, DC.
Re: Request from the Committee on Transportation and Infrastructure on
the Disadvantaged Business Enterprise (DBE) Program
Dear Mr. DeFazio,
My company, EFK Moen, is a woman-owned civil engineering design
firm with offices in Missouri, Illinois, and Georgia. I own 57% of the
company and I worked in the public sector as a highway design engineer,
project leader and regional design & operations manager for 13 years
before starting my company. I have a strong background in highway
design and in management of public highway projects, but it was still
difficult for me to get approval in the DBE program--the state
Department of Transportation (DOT) I first applied for DBE
certification with challenged me to prove that my father (a retired
construction engineer with no design experience and no involvement with
my company) or the other men who worked at my company were not the
``brains'' or ``influencers'' of my company. I stood firm, overcame
those hurdles and have been in business for over 22 years (1998 to the
present). I have grown my company from 4 to 54 engineers and surveyors;
with 5 offices in Missouri-Illinois-Georgia; and EFK Moen has a
respected position in the industry as an experienced design firm
capable of leading large highway and bridge infrastructure projects and
as a valued teaming partner with other national civil engineering
design firms. Without the DBE program, I expect I would be dabbling on
very small project assignments or I would be out of business.
The construction industry is built on managing risk and trusting
that others will be able to do their job well and contribute to a
project's profitability. For an agency or a prime contractor to take a
chance on a new/unknown/small firm there needs to be an incentive.
Women-owned and Minority-owned firms are ``unknowns'' because we are
seen as strangers to this industry--still after over 30 years of DBE-
MBE-WBE programs--because we do not fit the typical image of
construction workers and project managers. There are individuals who
are interested in giving firms a chance, but when they see it could
impact their bottom line it is a very hard call to make without an
incentive. The DBE program provides incentive and has been very
successful in the markets I work in. The program gives me enough value-
potential to have the initial discussions with a potential client--
whether that is an agency or prime contractor/consultant. Then my
company can prove that we are capable and have value on our own, beyond
the DBE incentives. We can build relationships that break the pattern
and help women and minorities become part of the ``face of the
industry''. EFK Moen has successfully become one of the top engineering
design firms in the Missouri public works market with MoDOT and with
local counties and municipalities; we have successfully become a valued
part of the very large engineering design industry in Illinois; and we
are starting out strong in the Georgia engineering public highway and
bridge design market. In each new market, our DBE certification has
provided us opportunities to team with other engineering firms and
prove our value.
The DBE programs run by the state DOT's we work with are very
strong, inclusive and ethical. The DOTs provide training opportunities
on how to do business with government agencies (which is quite a bit
different than doing private work) and facilitate introductions to
prime firms in the industry. Business owners in the program support
each other and support the philosophy of bringing other disadvantaged
people and firms into the industry. The FHWA and state DOT commitment
to the program sets the tone for the industry to value the program
also, and to strive to build up the industry's woman-owned and
minority-owned firms to match/represent the communities where those tax
dollars are spent. The state success in supporting capable DBE firms
creates a pool of women-owned and minority-owned firms who are
available to do work in their region on projects outside the program
also.
The culture created by the DBE program is valuable to our industry
and supports a healthy inclusive environment for firms and for diverse
individuals who are under-represented in our industry. Engineers' and
surveyors' potential is not based on their skin tone, ethnicity,
culture or gender--success in technical fields is based on a love of
problem solving. Encouraging diversity in our industry pushes that
reality forward and teaches us not to judge a person's capabilities
based on the appearance of other capable engineers we have worked with
in the past. As in any process, it is ``easier'' to continue the status
quo, to continue doing business with the same type of people you have
always worked with. But the reward for the community comes when we try
a little harder and reach out with opportunities for everyone.
Thank you for accepting my letter of support for the DBE program.
It has been very valuable to me, to my company, to the engineering/
construction industry and to our community.
With warm regards,
Linda Moen, P.E., LEED BD+C,
President and Managing Member, EFK Moen.
Letter of July 1, 2020, from Carla M. Williams, DBELO, Director of
Community and Business Engagement, Hillsborough Area Regional Transit
Authority, and President, COMTO Central Florida Chapter, Submitted for
the Record by Hon. Peter A. DeFazio
July 1, 2020.
Hon. Peter DeFazio,
Chair,
House Committee on Transportation and Infrastructure, United States
House of Representatives, Washington, DC.
RE: The Hillsborough Transit Authority's (HART) Support for the
Reauthorization of the DOT's DBE Program
The Hillsborough Transit Authority's (HART) is responding to the
request from the Committee on Transportation and Infrastructure for a
statement on the Disadvantaged Business Enterprise Program.
The DBE program has enhanced transit in the Tampa Bay area, in
Florida. Over a ten-year period (2010-2019), awards, with federal
dollars to primes averaged about $4.1 million, while about 11.1% of
$4.1 million went to DBE's. The major construction projects during this
period (2010-2013) included:
CNG Fueling Facility
TECO Streetcar Line Phase II
Contracts to DBE's spiked in 2011 to 108 DBE's. The final
construction was completed by 2014 and overall federal funds levelled
off after 2015 to average about 14.6 DBE contract awards.
Consequences if the Program Were Not to Receive Reauthorization
It would be unimaginable to discontinue the DBE program during
these tumultuous, economic strained times. The COVID-19 crisis hit with
people of color struggling to stay healthy, provide for their families,
and keep their small businesses going, while still striving to stay
safe from enforcement brutality or worst. The death toll of this
pandemic has been reported to hit Black and Brown skinned people in the
United States at a higher proportion than others. Removal of continued
support to Disadvantaged businesses would be like adding an accelerant
to an already well burning fire.
If the country's goal is to maintain a level playing field,
assistance is still needed for the minority disadvantaged business.
Yes, there has been improvement since the 1982 inception of the DBE
program. However, the scale of fairness and the Good Ole Boy Network
still is vibrant and not willing to yield to inclusion.
Still most of the subcontracting opportunities on HART projects are
only filled with a DBE when a goal is set because of federal funding
(Race Conscious). HART has experienced a major, well-known and highly
utilized company agreeing to hire DBE's but backed out and said that
the DBE was not cooperating on their expected salary. When in truth the
DBE Company was never contacted and the conversation about salary never
took place. The prime contractor found a non-DBE with a similar name
and attempted to pass the company off as the DBE. This deviousness only
surfaced when the DBE firm called the HART DBE Coordinator to ask what
was going on and when they could expect to start work.
Procurement Issues
Issue 1: Open and Transparent Communication of Informing DBE's of
Upcoming Opportunities
Notifying DBE's on regular solicitation lists. Currently DBE's,
registered in the HART Vendor System, are not notified automatically
when opportunities arise. The solicitations are advertised on the HART
website, however since the procurement solicitation is not linked to
the vendor registration system it can't automatically search for
vendors with the NAICS codes.
The vendor is required to download the bonfire software to their
individual computer for automatic notifications and to get details of a
solicitation.
Our DBE staff is collaborating with the Procurement Department to
improve the process to ensure the information can be transmitted to
qualified DBE's, who are registered in the HART Vendor System in a
timely manner so that they are aware of the bid opportunities and have
time to prepare the appropriate paperwork.
Issue 2: Good Faith Efforts to Sub-Contract DBE's
DBE Goal Waived by the Director of Procurement: HART experienced a
prime contractor who came unbelievably close to the project's
Independent Cost Estimation. The eligible, federally funded project
allowed for a DBE goal. When the solicitation was examined none of the
selected subcontractors were Unified Certification Program (UCP) DBE's.
This procurement required the use of the Good Faith Efforts clause.
After efforts were made to obtain UCP DBE's and the results were
examined, the additional expense to the prime contractor would have
been $66. HART DBE Compliance ruled the additional price was not
sufficient enough to stop the use of UCP DBE's on the project. The
Procurement Director had the last say. The Procurement Director ruled
the prime contractor had completed all that was asked of them and
because of that, the utilization of DBE's on the project was not
required.
Dropping DBE subcontractors from projects: After collaborating with
Hillsborough County DBE staff, they saw a pattern where the same Prime
Contractors solicit bids naming the DBE on their contract and later on
dropped the DBE from the project. While it may be a legitimate reason,
there may be a need to be notified by procurement staff at the time of
solicitation when the same Prime Contractor keeps repeating the
pattern.
Continuing the DBE Program will assist HART in continuing to make
transit a viable travel option for residents within the Tampa Bay
Region and attaining the objective to support transit projects that
promote economic development and job creation. HART strongly supports
the continuation of the DBE Program.
Sincerely,
Carla M. Williams, DBELO,
Director of Community and Business Engagement, Hillsborough Area
Regional Transit Authority.
President, COMTO Central Florida Chapter.
Letter of September 19, 2020, from Colette Holt, Colette Holt &
Associates, Submitted for the Record by Hon. Peter A. DeFazio
September 19, 2020.
Hon. Peter DeFazio,
Chairman,
House Committee on Transportation and Infrastructure, United States
House of Representatives Washington, DC.
Dear Chairman DeFazio:
I write in support of the continuation of the Disadvantaged
Business Enterprise program for federally-assisted transportation
projects. My law and consulting firm, Colette Holt & Associates, has
been involved in the DBE program and other contracting supplier
diversity programs for over 25 years. I have conducted or participated
in over 75 high-quality disparity and availability studies in recent
years. These research projects evaluated whether there was sufficient
evidence of discrimination for relevant jurisdictions to continue or to
enact remedial race- and gender-based programs for public sector
contracts. The statistical and anecdotal evidence gathered in these
studies is necessary to support the use of race- and gender-conscious
goals to combat discrimination and to ensure that program elements meet
applicable constitutional standards.
This discussion focuses on the salient evidentiary findings that
emerge from the following 23 Colette Holt & Associates studies. My
conclusions are also informed by my decades of work with federal
agencies, including USDOT and state and local government agencies
across the country. Over 30 years of research reveals a stark truth:
DBE goals remain necessary to ensure that minority- and woman-
owned businesses have full and fair opportunities to compete
for USDOT-funded contracts. Without goals, DBEs receive little
to no work. There is also no doubt that the availability and
capabilities of these firms are depressed by the effects of
past and current race and gender discrimination. The DBE
program therefore remains essential to ensure that the federal
government does not function as a passive participant in
ongoing discrimination in the market for USDOT-funded
contracts.
This finding is supported by two types of proof: 1. Quantitative or
statistical evidence looks at the utilization and availability of
minority and woman firms, and where necessary for agencies located in
the Ninth Circuit Court of Appeals, disparities between the utilization
and availability of DBEs. 2. Qualitative or anecdotal data that
describes the experiences of business owners in their market areas with
discriminatory barriers.
Quantitative Evidence from Recent Colette Holt & Associates Disparity
Studies
A high quality disparity or availability study provides detailed
results of an analysis of the recipient's utilization of DBEs, measured
in dollars paid as a percentage of all firms' receipt of dollars paid.
Contract records must include prime contract dollars and all
subcontractor dollars, not just those paid to DBE subcontractors. These
records must be examined at the 6-digit North American Industry
Classification System (``NAICS'') code level to ensure the results are
``narrowly tailored'' to the recipient's own contracting activities.
Next, a study must estimate the availability of minority- and
woman-owned businesses at the 6-digit level in the recipient's market
area that provide the types of services and goods purchased by the
recipient, as established by the utilization analysis.
Where there is a large gap between utilization and availability,
the courts have held that such disparities can support an inference of
discrimination. A ratio of 80 percent or lower supports a prima facie
inference that the cause of the disparity might be discrimination. This
``disparity testing'' is not required for recipients outside the Ninth
Circuit, since Congress, through the legislative process has previously
determined that discrimination constitutes a failure in the market for
USDOT-funded contracts. Even where statistical analyses is not
required, the gulf between the minority- and woman-owned firms that
could have received dollars and the actual dollars such businesses
received presents strong evidence that remedial intervention through
the use of narrowly tailored DBE contract goals is necessary and
supportable.
It can also be illuminating to contrast the results of the DBE
program, that uses contract goals to ensure equal opportunities, with
programs in the same market area that do not take affirmative steps to
remedy discrimination. Again, we found that without the use of goals,
DBEs received little or no work.
We have provided our studies to the Committee. Please allow me to
highlight a few results:
Our 2017 Disparity Study for the Washington State
Department of Transportation (``WSDOT'') found that DBEs received
dollars close to their availability on Federal Highway Administration
funded contracts: DBE availability was 13.80 percent, and they were
paid 12.90 percent of the dollars, yielding a disparity ratio of 93.30
percent. However, on state-funded highway construction projects on
which WSDOT is prohibited from setting race- and gender-conscious goals
by a state constitutional amendment, DBE availability was 19.0 percent
\1\, but they received only 6.40 percent of the dollars, yielding a
disparity ratio of 33.50 percent. Clearly, the use of goals is what
drove the FHWA results.
---------------------------------------------------------------------------
\1\ The availability estimates vary by funding source because the
types of contracts are somewhat different in scope and scale.
---------------------------------------------------------------------------
Even when DBE contract goals are set, disadvantaged firms
often received significantly less than would be expected in a
discrimination-free market. For example, DBEs constituted 8.90 percent
of the firms available to perform on FHWA-funded contracts awarded by
the Texas Department of Transportation in our 2019 Disparity Study, yet
their availability was 28.10 percent, yielding a disparity ratio of
31.67 percent.
Our 2019 State of Washington Disparity Study, which
examined state-funded contracts other than for highway construction,
found that minority and woman firms constituted 16.53 percent of the
available firms but received only 9.00 percent of the dollars, for a
disparity ratio of 54.43 percent.
Even in the FHWA DBE program, DBEs, especially Black-
owned businesses, often received few dollars in the recipient's core
contracting activities. For example, in NAICS code 237310, Highway,
Street and Bridge Construction, non-DBEs received 94 percent of
contract dollars from NCDOT; Blacks received 0.3 percent. In the same
subindustry in Washington State, non-DBEs received 88 percent of
contract dollars; Blacks received zero dollars. Likewise, in code
237990, Other Heavy and Civil Engineering
Construction, non-DBEs received 100 percent of contract
dollars from NCDOT; DBEs received nothing. In the same subindustry in
Washington State, non-DBEs received 94 percent of contract dollars;
Blacks received zero dollars.
These and many more reports make it clear that discrimination
continues to impede opportunities on the basis of race and gender, and
that without the use of contract goals, the ``playing field'' for
federal-aid contracts would remain tilted in favor of long established
firms that enjoy the benefits of historic and ongoing structural
exclusion that advantages White males.
Qualitative Evidence from Recent Colette Holt & Associates Disparity
Studies
Qualitative evidence gathered through surveys and personal
interviews from these and other studies further supports the conclusion
that racism and sexism continue to impede the entrepreneurial
aspirations of DBEs seeking government contracts. Some representative
comments follow.
Discriminatory Attitudes and Negative Perceptions of Competency and
Professionalism
Many minority and women business owners reported that they continue
to encounter discriminatory attitudes, stereotypes and negative
perceptions of their qualifications and core competencies and
capabilities by other firms and government officials. Explicit and
implicit biases impact their attempts to obtain contracts and to be
treated equally. Respondents reported that White men frequently display
negative attitudes relative to their competency, skill, and
professionalism.
``When people meet me, [being an MBE] they assume certain
things. As they get to know me and understand that I can speak
construction, that I'm bilingual, that I speak engineering,
then I get the comment, `Oh you're different.' Or, `You're
educated.' '' (2019 Dallas Fort Worth Int'l Airport Disparity
Study).
``The perception is just there that if you're Black or if
you're a woman you probably don't know how to do X, Y, and Z
type of work. So, they've already put [you] in that
pigeonhole.'' (2014 State of Missouri Disparity Study).
``[State personnel] look down on us as some kind of beggars for
percentages.'' (2016 Illinois State Toll Highway Authority).
Minority- and woman-owned businesses reported that they were
perceived to lack the capacity to do additional or more complex work.
``There is significant evidence that the larger the goals are,
the higher the capacity building . . . . People will take the
opportunities. Because we're women or we're minorities doesn't
mean that we're not entrepreneurs and we don't seize
opportunity. It's just that the opportunity doesn't exist in
the current market.'' (2015 State of Illinois Disparity Study).
Many women reported unfair treatment or sexual harassment in the
workplace.
``I still do find the initial contact with specifically, a
general contractor, there is somewhat that attitude of you're a
woman, let me tell you how to do this.'' (2019 Texas Dept. of
Transportation Disparity Study).
``I am the female, and they bring me like a tiny, little role
in this large contract. They bring me to the interview to make
the showing because I interview well and so they're going to
put me in front of people . . . Then no work comes out of it.''
(2017 Washington State Department of Transportation Disparity
Study).
``If you go into a construction zone, and you got wall-to-wall
men construction in concrete, whether it's Mexican, it doesn't
matter, but you feel like you're the only woman there. I got a
gun with me all the time, all the time.'' (2019 State of
Washington Disparity Study).
``Let's just be honest. I'm a woman who's in construction so
that just equals bulls' eye . . . Other contractors who come in
behind you and they call you [trade] chicks . . . Or, they tell
you, what has the world come to because you're [trade] chicks .
. . Men come out and they complain that a woman is running the
crew . . . Even the men that I hire--I'm giving you a
paycheck--struggle with taking orders from a woman . . .
Someone comes to the job and they go to one of the guys [I
employ] and they say, are you the lead there?'' (2016 Illinois
State Toll Highway Authority).
`` `Here comes that big titted blonde'. That's what they'll
say, right out loud, in front of everybody. And all the guys
will just laugh. And I've got to suck it up and just do my job
. . . [Even my employees often won't stand up for me.] If I
react, that's just going to make me more belittled and [look]
petty.'' (2019 State of Washington Disparity Study).
Access to Industry and Professional Networks
Relationships are pivotal to obtaining public transportation work
as subcontractors and to opportunities to work as prime vendors. Both
minority and women respondents reported difficulty in accessing
networks and fostering relationships necessary for professional success
and viability. Business owners frequently stated that there is a ``good
old boy'' network. Barriers extended to agency staff; DBEs were unable
to gain access to and communicate with key agency decisionmakers.
``The transportation industry as a whole is dominated by the
civil engineers, which typically the folks graduating in civil
engineering are White men. You have a very low proportion of
women and minorities with those degrees. Inherently, then in
the workplace, you're seeing very low amounts of diversity.
Same thing in environmental services. You don't get a lot of
women who are wildlife biologists. Someone with that type of
experience typically has been hunting and fishing with his
father and his grandpa their entire lives and they have a good
old boys club. They go drinking, they go fishing, they go
playing golf.'' (2019 Texas Department of Transportation
Disparity Study).
``It's not being respected in the room, and it is body
language. It's relationships, which I heard over and over again
here, as a side word for experience. It's really, `Do I have
experience with you?' And somebody I'm more comfortable with,
because they look like me, I'm going to choose the person I'm
more comfortable with because they look like me.'' (2017
Washington State Department of Transportation Disparity Study).
``People have relationships with people that they feel that
they can identify with. And that might be a problem because
they're not willing to open the door for you and let you get
in.'' (2014 Metropolitan Nashville Airport Authority Disparity
Study).
Obtaining Work on an Equal Basis
DBEs were in almost unanimous agreement that contract goals remain
necessary to level the playing field and equalize opportunities.
Without contract goals, they would receive little or no work. Race- and
gender-neutral approaches alone are viewed as inadequate and unlikely
to ensure a level playing field.
``If those DBE goals had not been in there, we absolutely would
not have been considered . . . . In fact, we were point blank
told on a contract because they didn't have a DBE goal of some
kind, they didn't even need to consider us.'' (2014
Metropolitan Nashville Airport Authority Disparity Study).
``I remember when the Tollway had no goals, and it was
absolutely abysmal. There was never a minority or a female that
worked on a Tollway job, ever. And we would tell them, DOT has
goals. They find women and minorities to do work. It's the same
kind of work that the Tollway does, and the DOT does. And it
wasn't until the Tollway started to have some goals that we
started to get work on Tollway projects.'' (2016 Illinois State
Toll Highway Authority).
``If there is no goal-setting, you don't have any opportunity
to perform as a subcontractor.'' (2016 Kansas City Consortium
Disparity Study).
``[Prime contractors] use us because they have to.'' (2017
Washington State Department of Transportation Disparity Study).
``If you're not a DBE or HUB or SBE, you're not going to be
considered for any work as a consultant for TxDOT because
they're going to use these legacy firms for most of their work
on the consulting side.'' (2019 Texas Dept. of Transportation
Disparity Study).
Conclusion
The findings from our studies and other reports provide strong
quantitative and qualitative evidence that Congress has a strong basis
in evidence to continue to require recipients to implement the remedial
DBE program. The studies provide proof of pervasive and systemic
discrimination against women and minorities in the market for federal-
aid contracts and support the need for appropriate race- and gender-
conscious measures.
Thank you for the opportunity to submit this information.
Very truly yours,
Colette Holt,
Colette Holt & Associates.
Letter of June 16, 2020, from Katherine M. Cloonen, President, JK Steel
Erectors, Inc., Submitted for the Record by Hon. Peter A. DeFazio
June 16, 2020.
Hon. Peter DeFazio,
Chairman,
House Committee on Transportation and Infrastructure, United States
House of Representatives, Washington, DC.
Dear Mr. DeFazio:
Regarding the DBE program and discrimination faced by female
contractors, I am writing to provide a few examples of how, after
owning my own business for nearly thirty years, I, the female owner,
still face discrimination in the construction field. My company
specializes in the installation of structural steel and rebar. The
following examples punctuate the need to continue the DBE program in
the 2020 highway bill:
I asked a truck dealer for the bottom price on a pickup
truck. A male employee called the same dealer for the bottom price on
the same truck from the same sales rep, and he was able to get a lower
price, even though my name was on the check written for the purchase.
A prime contractor calls asking for the estimator of the
company. When I say that I am the estimator, the person hangs up the
phone.
A salesperson calls and asks for the man in charge of
buying the tools, and I say that I am the woman in charge of buying
tools. The person hangs up the phone.
When I am owed money by a contractor, and I call to ask
about the funds, the accounts payable person 1) is not available, 2)
has misplaced my check, 3) has misplaced my invoice or other required
paperwork, or 4) simply does not return my call. When a male employee
from my company calls, the money suddenly is on its way.
The project manager of a prime contractor always called
my foreperson, who was a male, for scheduling, he would not call me,
even though I told him I was in charge of scheduling.
A male project manager lied in a meeting as to what was
said in a phone conversation with me. That particular lie cost me
nearly $100,000 even though I stated he clearly lied.
After a deadline for a bid, I found that I was not asked
to bid a project because they ``don't need no women on the job.''
A contractor called and asked me if I wanted to make more
money. Instead of giving me an invitation to bid, he invited me to a
meeting to sell health and beauty products for a multi-level marketing
company. I told him that if I had to sell the beauty products in order
to be a subcontractor for him, I would not do it. I have not done
business with that company since then.
There are more examples over the years, but this is a sample of
what still happens in the construction industry. Thank you for your
consideration.
Sincerely.
Katherine M. Cloonen,
President, JK Steel Erectors, Inc.
Letter of June 24, 2020, from Carol L. Kwan, Carol Kwan Consulting LLC,
Submitted for the Record by Hon. Peter A. DeFazio
June 24, 2020.
Hon. Peter DeFazio,
Chairman,
House Committee on Transportation and Infrastructure, United States
House of Representatives, Washington, DC.
Subject: Testimony Regarding the Disadvantaged Business Enterprise
Program
Dear Mr. DeFazio:
I am responding to the request from the Committee on Transportation
and Infrastructure for a letter or statement on the Disadvantaged
Business Enterprise (DBE) Program.
My company began in 2003 after I was laid off from a large
residential development corporation. My daughter was one-year old and
had been very sickly, making it difficult for me to perform my duties
reliably. It was a mutually agreed upon lay off. My former employer
gave me a generous severance package and has been one of my clients
occasionally since that time.
For the first several years, I focused on private clients until my
daughter became healthier. Beginning in 2008, I returned to working in
construction, mostly smaller projects. Because of the recession, by
2011 most of my work had dried up. My net income that year was $4,000
and I considered myself lucky that it was in the black. I had become
aware of the DBE program several years earlier but was busy enough at
the time not to bother with it. Desperate times call for desperate
measures, and I set about having my company certified as a DBE. That
came through in 2012, and I started getting more work. Two large
general contractors subcontracted with me on DBE projects, one with EPA
funding and one with DOT funding. The first company had contacted me
for the EPA funded project. A year or so later, I was bidding on a non-
DBE project and contacted the company about providing a bid. The man
that I spoke with seemed reluctant, as though he doubted that I could
do the work. I encounter that often as a woman working in construction.
Fortunately, he checked with the project manager for the contract that
I already had with the company, who vouched for me. I have had many
contracts with both the first and second contractors since then, both
DBE and non-DBE projects.
As a Certified Arborist, there are few of us who work in the
construction industry here in Hawaii. My primary competitor has been
doing this type of work for over five decades and was the first person
that contractors thought of when they needed tree protection work. He
is a nice man and highly qualified, but a formidable competitor for a
company like mine that was trying to get established. The DBE program
gave me a foot in the door in being able to compete against him. My net
income (basically my salary as a 1-person company) has gone from around
$40,000 a year to around $80,000-$120,000 a year, a much more livable
income in the State of Hawaii, in large part because of the network of
clients that I have built as a DBE company.
I still encounter contractors who refuse to hire a woman, either as
a subcontractor or an employee. Some of these contractors are small,
ethnic companies with cultural backgrounds that are strongly opposed to
nontraditional roles for women. Occasionally one of them will hire me
because they are desperate and are unable to find anyone else. It can
make for an uncomfortable working situation, but I do it in part
because I look at it as chipping away at their preconceived biases of
what women can and cannot do. The DBE program helps to do that. By
forcing contractors out of their comfort zone, it helps to chip away at
societal biases and makes the playing field a little more level.
I hope that Congress will act to continue the DBE program. It is
worthwhile and it does make a difference. Should you have any questions
or would like additional information, I can be reached at [redacted].
Very truly yours,
Carol L. Kwan,
Carol Kwan Consulting LLC.
Letter of May 26, 2020, from Sarah Imberman, S. Levy Foods, Submitted
for the Record by Hon. Peter A. DeFazio
May 26, 2020.
To: Peter DeFazio--Chairman of the House Committee on
Transportation and Infrastructure
Re: Statement on the Disadvantage Business Enterprise Program
Dear Mr. DeFazio,
I am writing to convey the importance of the Disadvantage Business
Enterprise (DBE) Program. I started my company in 2004, making
chocolate out of my mom's kitchen. After operating my bakery in Chicago
for five years, I learned about the DBE program and first became
certified as an Airport Concession Disadvantage Business Enterprise
(ACDBE) in 2009.
I have often felt discriminated against and treated differently
because of the fact that I am a woman in business. I will never forget
when the owner of a local Chicago bank asked for a meeting and wanted
to discuss my decision to close my street side operation in order to
focus on growing my business bringing local restaurants to airports. I
remember leaving the meeting feeling like I had been ``called into the
principal's office'' as he said things to me like, ``I think your
decision was rash and immature.'' Do I think he would have said this to
me if I was a businessman instead of businesswoman? No. It turns out
that closing my street side location to focus on growing the airport
business was the best business decision that I had made, albeit an
extremely difficult one. I am so fortunate that the ACDBE program
exists, as it has allowed me to grow my business beyond my mom's
apartment and into seven airports across the country.
I have benefited greatly from the DBE program and cannot imagine
what my business would become without it. Because of the ACDBE program,
I have a seat at the table in the airport industry, even when others
don't want me to.
Sincerely,
Sarah Imberman,
S. Levy Foods.
Letter of June 17, 2020, from Constance Macolino, President, Puget
Sound Steel Co., Inc., Submitted for the Record by Hon. Peter A.
DeFazio
June 17, 2020.
Mr. Peter DeFazio,
Chairman,
House Committee on Transportation and Infrastructure, United States
House of Representatives, Washington, DC.
RE: Disadvantaged Business Enterprise Program
Dear Chairman DeFazio:
I am writing to you to request your support for the authorization
of the DBE program in the upcoming 2020 highway bill. My firm is a
reinforcing steel fabricator with over fifty years in business in the
State of Washington and I can attest to the real need for this program
for women-owned businesses in the transportation construction
marketplace. The plain and simple fact is that disadvantaged businesses
do not face a level playing field and continue to suffer discriminatory
barriers to full and fair access to construction contracts.
By way of illustration, in June of 2017, majority women were waived
out of the WSDOT DBE program due to the results of a disparity study.
In the two years prior, Puget Sound Steel was awarded a total of 23
contracts with WSDOT totaling almost 3,000 tons of steel and over
$4,000,000.00 in revenue. Since June 2017, we have bid in excess of
7,000 tons of WSDOT work and have been awarded 1 job, for a total of
185 tons and $259,000.00 in revenue. Most, if not all, of that work
went to public companies listed on the NYSE.
Then there are the anecdotal examples of why this program is
needed. Puget Sound Steel has supplied reinforcing steel to a number of
prime contractors who do both commercial and civil work; when the
primes don't know we are a women owned business (commercial arena) we
are awarded jobs based on price and past performance. When we designate
as a DBE (civil arena) and without set DBE goals on a given project, we
are passed over for work. On multiple occasions I have had to ask
employees at the same company to please walk across the hall and tell
their civil division that our firm is competent and able to perform the
work on any given project.
I cannot over-state how important this program is to small
businesses, such as mine. Prime contractors, most of whom are owned
publicly or by white males, already receive almost ninety percent of
federal contract dollars in construction. This program allows us the
opportunity to participate, which is all we ask.
I would welcome the opportunity to give additional information to
your committee, if you would find that helpful, and thank you in
advance for your continued support of this necessary program.
Very truly yours,
Constance Macolino,
President, Puget Sound Steel Co., Inc.
Letter of September 9, 2020, from Robert S. Bright, Founder and
President, Talson Solutions, LLC, Submitted for the Record by Hon.
Peter A. DeFazio
September 9, 2020.
Mr. Matt Leasure,
Special Assistant to the Chairman,
House Committee on Transportation and Infrastructure.
Re: Disadvantaged Business Enterprise Program--Personal Net Worth
Mr. Leasure:
I am pleased to submit my comments and suggestion for change to the
Disadvantaged Business Enterprise (DBE) Program. I am Robert S. Bright,
Founder and President of Talson Solutions, LLC (Talson), a DBE,
Minority Business Enterprise (MBE) and Small Business Enterprise (SBE).
Founded in 2001 and headquartered in Philadelphia, Talson is a capital
project consulting firm with domestic United States and international
experience in the transportation and infrastructure industries. Our
clients include Allegheny Port Authority, LA Metro, New Jersey Transit,
Panama Canal Authority, Sound Transit, and Denver International Airport
to name a few.
I wish to bring to your attention with the Personal Net Worth (PNW)
requirement to establish and maintain the DBE status. In essence, the
PNW requirement of $1.32 million has not changed or been adjusted for
inflation in approximately ten years. However, the price of labor,
goods and services (Consumer Price Index) have increased. DBE's PNW are
typically based on the value of an owner's retirement account or other
forms of investment that are not readily available without adverse tax
consequences. As a result, the growth of these assets has significantly
increased with advances in the United States stock market (i.e. S&P
Index). As the value of the investment may increase, this potentially
causes the PNW to increase without day-to-day management from the DBE
owner. Although this may appear good, it is not for the DBE owner whom
is worried about exceeding the initial PNW base and thereby losing the
DBE status. The DBE owner is then forced to concentrate on the PNW
value and not the business operation. In addition, the DBE owner may
choose to take drastic steps or sell equities with tax disadvantages in
order to maintain the required PNW. The loss of DBE status for many
firms would cause irrevocable harm leading to business interruption and
loss revenue preventing long-term firm growth for value generation.
The State of Maryland Department of Transportation and New York
recognized the need for increases in the PNW. As a DBE firm grows, the
Owner' s PNW typically increases due to retirement investments and
asset purchases. This allows the DBE to increase their confidence to
take on greater risks and larger value contracts. However, if the DBE
exceeds its PNW, there is a substantial risk that DBE participation in
future contracts will decrease due to the lack of the DBE
certification. The following two examples reflect an adjustment by the
Maryland Department of Transportation and a petition from New York on
the need for changes in PNW:
(1) In December 2019, The Maryland Department of Transportation
announced that the Personal Net Worth (PNW) cap applied to the Minority
Business Enterprise (MBE) Program will increase from $1,749,347 to
$1,771,564, effective January 1, 2020. As required by Maryland law, the
State's MBE Program adjusts its PNW cap annually based on the Consumer
Price Index.
(2) New York's Governor Cuomo rejected a petition to eliminate the
$3.5 million personal net worth requirement especially for those in
both the construction and financial sectors, in order to grow and
participate in government contracts. These sectors have minimum income
requirements that need to be met in order to be eligible to bid, win
mid-size projects, and gain access to capital. It will also enable
prime contractors to fulfill their 30% MWBE sub-contracting goal.
Failure to adjust the PNW requirement prevents real growth for DBEs
and the introduction of new DBEs. Additionally, without an annual PNW
adjustment, the USDOT may fail to capture the importance of the overall
DBE program by allowing DBEs to grow and build long-term investment in
the business and communities in which we live.
Thank you for your consideration to review the maximum PNW
requirement for DBEs. Consideration for annual adjustment (i.e.,
Consumer Price Index) is strongly recommended and can only reflect
current economic trends.
Respectfully yours,
Robert S. Bright,
Founder and President, Talson Solutions, LLC.
cc: Ms. Nicole Christus, American Public Transportation Association
Letter of September 8, 2020, from Lorenzo Thompson, Principal, Thompson
Civil, LLC, Submitted for the Record by Hon. Peter A. DeFazio
September 8, 2020.
Hon. Peter DeFazio,
Chair,
House Committee on Transportation and Infrastructure, United States
House of Representatives, Washington, DC.
Re: Request from the Committee on Transportation and Infrastructure on
the Disadvantaged Business Enterprise (DBE) Program
Dear Mr. DeFazio,
I am Lorenzo Thompson and Principal of Thompson Civil, LLC. The
only way for my firm to enjoy the work we perform is to be a part of a
program that provides project participation from diverse firms. We are
located in St. Louis, Missouri, and Illinois. We have only been in the
program for 3 years and it has highly contributed to our success.
The construction industry is built on managing risk and trusting
that others will be able to do their job well and contribute to a
project's profitability. For an agency or a prime contractor to take a
chance on an unknown firm there needs to be an incentive. Women-owned
and Minority-owned firms are ``unknowns'' because women and many
minorities are seen as strangers to this industry--still after over 30
years of DBE-MBE-WBE programs--because we do not fit the typical image
of the construction workers and project managers. The DBE program
provides incentive and has been very successful in the state Department
of Transportation (DOT) markets.
The Federal Highway Administration (FHWA) and state DOT commitment
to the DBE program sets the tone for the industry to value the program
and to strive to build up the industry's woman-owned and minority-owned
firms to match/represent the communities where the tax dollars are
spent. The state DOT success in supporting capable DBE firms creates a
pool of women-owned and minority-owned firms who are available to do
work in their region on projects outside the program also.
The culture created by the DBE program is valuable to our industry
and supports a healthy inclusive environment for diverse firms and for
diverse individuals who are under-represented in our industry.
Engineers' and surveyors' potential is not based on their skin tone,
ethnicity, culture, or gender--success in technical fields is based on
a love of problem solving. Encouraging diversity in our industry pushes
that reality forward and teaches us not to judge a person's
capabilities based on the appearance of capable engineers we have
worked with in the past. As in any process, it is ``easier'' to
continue the status quo, to continue doing business with the same type
of people you have always worked with. But the reward for the community
comes when we try a little harder and reach out with opportunities for
everyone.
Thank you for accepting this letter of support for the DBE program.
It has been very valuable to my company, to the engineering/
construction industry and to our community.
With warm regards,
Lorenzo Thompson,
Principal, Thompson Civil, LLC.
Letter of July 1, 2020, from Katey Doman, President, TyE Bar LLC,
Submitted for the Record by Hon. Peter A. DeFazio
July 1, 2020.
Mr. Peter DeFazio,
Chairman,
House Committee on Transportation and Infrastructure, United States
House of Representatives, Washington, DC.
RE: Disadvantaged Business Enterprise Program
Dear Chairman DeFazio:
With the upcoming 2020 Highway Transportation Bill being discussed,
I felt compelled to reach out to you for your support of the DBE
Program to be included in the proposed bill. As owner of TyE Bar LLC, a
DBE reinforcement steel and concrete paving hardware manufacturer, I
still consider myself a start-up company since we have only been in
existence for just 5 years. Without having my DBE Certification, I
firmly believe my company wouldn't have made it this far when competing
against the conglomerate steel manufacturing companies across our
nation's landscape.
In 2015 I felt compelled to start a manufacturing business in the
heart of Pittsburgh, to bring manufacturing jobs back to an area that
has been left abandoned over the last few decades. I knew that it
wouldn't be possible to compete in the market unless I was able to
receive my DBE certification. Prior to receiving my certification, I
had only been awarded contracts that totalled $800,000, once my
certification had been granted, I picked up an additional $1,800,000 of
revenue in just 3 months--my revenue had more than doubled.
Being a start-up company with over a million dollars in loans, it
is inevitable that I am not the low price to the DOT Contracting
Communities. With no ties to steel mills I am receiving raw material
from my very own competitors--I can never be low for that reason alone.
Without DOT Agency's having DBE Programs in place there wouldn't be an
arena that I could possibly compete in due to the disadvantages I face
as a woman-owned, independent, start-up manufacturer.
What does the DBE Program do for the American People?
In 2015 I had employed 4 blue-collared employees and five years
later I am proud to have 34 employees helping manufacture products that
go into the roads and bridges that our American people travel every
day. Last year our revenue has grown to $11,000,000 and if the DBE
program remains in effect for the 2020 Transportation Bill I anticipate
with my past growth rate that by 2022 we will employ more than 70
people and manufacture over $23 million dollars in heavy highway
products.
The inclusion of the DBE Program is vital to helping small
businesses such as TyE Bar. Without the DBE Program I would lose more
than three quarters of my business, most likely TyE Bar would cease to
exist. The DBE Program allows for us to participate, doesn't guarantee
us work, but gives us the opportunity to be considered.
Mr. Chairman, I ask that you consider what the DBE Program brings
to small businesses and the American People. If there is any additional
information that you would find helpful, please don't hesitate to reach
out to me.
Thank you kindly for your consideration,
Katey Doman,
President, TyE Bar LLC.
Statement of Joann Payne, President, Women First National Legislative
Committee, Submitted for the Record by Hon. Peter A. DeFazio
Chairman Peter DeFazio, Congressman Sam Graves and Chairwoman
Eleanor Holmes Norton----
Thank you for the opportunity to submit a statement for the
Congressional Record on behalf of Women First National Legislative
Committee (Women First). Women First is a nonpartisan, national
grassroots advocacy group that promotes and protects the interests of
women owned businesses certified in the United States Department of
Transportation Disadvantaged Business Enterprise (DBE) Program. Founded
in 1985, Women First has been advocating for small women owned
businesses in the highway construction industry for the past 35 years.
Introduction
In 2001, Women First submitted an Amicus Brief to the Supreme Court
in Adarand Construction v. Mineta. In the brief, it said, ``they have
experienced firsthand the detrimental effects of the discriminatory
practices, which, to this day, continue to plague the construction
industry. As a result of this discrimination, the ability of women
owned businesses to compete for government contracts in the
transportation related area has been severely hampered.'' \1\
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\1\ Brief of Women First National Legislative Committee, et al.,
Amici Curiae in Support of Affirmance of the Tenth Circuit Court of
Appeals.
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And in 2020 those words are still true today.
From the day Eve took a bite out of the apple in the Garden of
Eden, women have been submitted to systemic sex discrimination in every
aspect of their social, economic, and political lives. They have been
undervalued and remain underrepresented in position of power.
A study conducted by the Pew Research Center found that two-thirds
of women in the United States believe we still have a way to go to
achieving equality. Women executives, doctors, lawyers, and
professional athletes earn less money than men. According to a 2019
study done by McKinsey & Company women earn more bachelor's degrees
then men, but men obtain more entry-level positions in corporate
America. The study also found that men outnumber women in management-
level positions 62% to 38%. There are only 7% of Fortune 500 CEOs that
are women. Congress in 2020 is 75% men.
When I testified in 1986 to the Senate Environment and Public Works
Committee supporting the inclusion of women in the DBE program, I
testified that women made 70 cents to a man's dollar. Today, a woman
makes 79 cents to a man's dollar. The US Women's Soccer Team has won
four World Cups, four Olympic gold medals, and eight Gold Cups, yet
they are grossly underpaid, lack the necessary training facilities and
poor travel conditions that are not equal to the US Men's Soccer Team,
who has not been as successful as the women's team.
Like the men's soccer team, the women's soccer team is governed
under the US Soccer Federation (USSF) with the same rules, regulations
and international competition agenda. The US Women's Soccer Team filed
a gender discrimination lawsuit against the USSF. USSF response to the
lawsuit was Men were superior to women because they have greater
physical strength and skills . . . need I say more?
Program Overview
The DBE Program is a competitive small business program that has an
innovative goal setting economic development program that produces
results year after year.
The program:
Creates jobs--approximately 125,000 jobs are created by
DBE companies annually
Serves as an engine of growth for our nation's economy
even in with the Pandemic
Establishes a tax base from women and minority owned
businesses;
Promotes competition in an industry where there was very
little for years;
Levels the playing field by opening access
Promotes diversity
The DBE Program has proven to be an equal opportunity program,
which benefits all Americans by promoting the development and
competitiveness of America's small businesses. In fact, the DBE Program
is the most successful small business contracting program for women.
For example, the DBE Program has significantly increased the percentage
of women owned construction firms. Women DBE participation has
increased from 1.6% in 1986 to over 7% in 2018.
Responses from DBEs
Women First collected about 40 letters from DBEs across the country
asking them to submit to the Committee on Transportation &
Infrastructure their stories and why the DBE program should continue.
Wisconsin: ``I am writing to emphasize the importance of the
reauthorization of the Federal DBE Program in the Highway
Transportation Bill. We are a minority-owned business of color and we
have been shut out of many opportunities to participate on projects. I
would like to see more opportunity for disadvantaged business
enterprises of Hispanic Americans''.
Washington State: ``Against many challenges, both from individuals
and firms within the male-dominated construction industry, labor
unions, lack of capital and bonding, my firm rose to become the only
female-owned, union electrical contractor specializing in highway
electrical work in the State of Washington. From 2010-2017 my firm
successfully completed 122 projects valued at nearly $ 80 million. That
is, until the agency that was supposed to support women and minority
owned businesses, WSDOT Office of Equal Opportunity, removed white
women from the federal DBE program in June of 2017. My firm went from
doing nearly $ 9 million a year, preparing to graduate from the
program, to being out of business in only 18 months''.
Missouri: ``The construction industry is built on managing risk and
trusting that others will be able to do their job well and contribute
to a project's profitability. For an agency or a prime contractor to
take a chance on a new/unknown/small firm there needs to be an
incentive. Women-owned and Minority-owned firms are ``unknowns''
because we are seen as strangers to this industry--still after over 30
years of DBE-MBE-WBE programs because we do not fit the typical image
of construction workers and project managers. The DBE program provides
incentive and has been very successful in the markets I work in. The
program gives me enough value-potential to have the initial discussions
with a potential client--whether that is an agency or prime contractor/
consultant. Then my company can prove that we are capable and have
value on our own, beyond the DBE incentive''.
Illinois: ``More importantly, we are forced to wait sometimes
months after the general contractor is paid before we receive payment.
More times than not, we are forced to call the general contractor
numerous times requesting we be paid and this is after confirming they
have been paid by the owner. It is extremely frustrating to complete a
job on or ahead of schedule, with complete satisfaction of the general
contractor only to be sent a perceived message of, `You'll get paid
when I feel like paying you and not a day before!' It is extremely
disheartening. The DBE Program has enhanced our opportunities in the
highway, transit, and airport construction industries simply by
existing. The consequences of not having the program would be our
business would not exist. But for the Disadvantage Business Enterprise
and the requirements to use minority owned businesses, we would not in
reality because general contractors would self-perform. Securing
working capital is extremely difficult for minority owned businesses.
Personally, I am repeatedly forced to secure loans with interest rates
that mirror loans from merchant cash advances. While the interest rates
are uncomfortably high, the loans are necessary to make payroll and
purchase the equipment and materials needed to perform the job in the
absence of mobilization.''
Massachusetts: ``Small businesses, especially women-owned firms,
need to be given a chance to prove themselves. The DBE program does
just that by highlighting firms that may otherwise have doors
permanently closed. I have experienced discrimination in the
construction industry through the years, and, have been pushed off
projects that I was equally qualified to do. I am thankful for the DBE
program. It serves a vital role by providing checks and balances to
assure that all companies, large, small, women, and minorities are
allowed the equal opportunity to participate.''
Changes to the DBE Program
The DBE program only applies to highway, transit, and airport
construction and related industries. One purpose of the DBE program is
to develop minority and women construction businesses so they can gain
experience and expertise to compete for federal, local, and state
contracts.
The perceived outcome is DBEs would achieve three consecutive years
of gross receipts of $23.980 million and graduate out of the program
and successfully compete equally with majority male firms for federal,
state, and local contracts. Unfortunately, the beneficiaries of the
statutory size cap of 23.980 million applies only to a small percentage
of DBEs.
In reality, the DBE program is a subcontracting program where
ninety-nine percent of DBEs are limited to the Small Business Size
Standard and the cap governed by the North American Industry
Classification System (NAICS) Code. Depending on the code
classification, highway, transit, and airport construction, specialty
trade sub contractors may have a cap that is between $3 million to $17
million. By connecting the subcontractors to the size standard in the
NAICS Codes, it prohibits DBEs from developing into prime/ general
contractors and puts them at a disadvantage with non-DBE companies.
Additionally, it creates an endless cycle of DBEs graduating out of
the program to finding their company has lost fifty percent or more of
its business and a need to reapply back into the program after one
year. One of the main reasons this cycle continues to escalate is the
rise in material cost in the construction industry especially in the
last three years.
Recommendations:
1. Gross Receipts
There should be two statutory gross receipts levels. One for DBE
companies that compete as prime contractors and one for the Specialty
and sub-contractors. Once the DBE graduates out of the Small Business
levels, Congress should create a new medium-size business program that
would include all medium size companies (majority males included) with
goals, certification, limited personal worth and gross receipts.
2. DBE Procurement Disagreements with Prime Contractors and Recipients
The Secretary should take additional steps and procedures to ensure
that recipients report immediately to the Federal Administrator any
procurement disputes that may develop between DBEs, general contractors
and or recipients. There has been an increase in procurement disputes
between DBEs general contractors and state DOTs. DBEs have contract
agreements with general contractors. The states try to stay out of the
mix but are asked to notify FHWA if conflict arises, however, they have
been slow to report problems. This has resulted in millions of dollars
lost by DBE firms. Let us not forget that firms that are certified in
the program are there because they are at a disadvantaged over non-
minority firms.
3. Disparity Studies
The Secretary should create a Disparity Study Committee to develop
guidelines for firms and recipients conducting Disparity Studies. The
Committee should include, but not limited to representatives from
disparity study firms, DBEs, DBE advocates, Federal Highway's Office of
Civil Rights, department lawyers, and state department of
transportation. Presently, there are no guidelines in place for firms
who conduct disparity studies or recipients who want the studies
conducted. This situation has resulted in an unresolved issue in
Washington State that has left one of the protected groups out of the
``goal-counting'' on federal projects.
4. Unbundling
Require the Secretary to create an incentive program for state
department of transportation and other recipients to unbundle mega-
contracts and create contracts that are $2 million dollars or less for
DBEs to compete for as primes.
If the Program Does Not Continue
In representing women-owned DBEs for thirty-five years, I have
heard women discuss the problems they face in the construction industry
with Members of Congress and the Administration. These women, everyday,
have to face the assumption by others that they can not do the work and
run their businesses. Women owned businesses still have problems
obtaining loans and bonding and after years in business they still have
to explain that they are the boss to men on the jobs who refuse to
believe that a woman can be the boss.
If the DBE Program were not to continue, I believe not just women
and minority owned companies will be severely affected, but small
majority owned sub-contracting businesses will be affected as well. The
only small business program in the highway, airport and transit
industries will disappear. There would be no reason for sub-contract
work even to majority firms thus competition would be eliminated and
prices will climb.
The trend of the industry the last several years has been the prime
contractors are doing more of the work in-house. A great example is
what happen in Washington State when women were removed from the goal
setting program. The group that benefited the most and increase in
percentage was the large majority firms.
Conclusion
I had a member of the Women First Board of Trustees tell me when
asked why she still felt the burn of discrimination after years in
business. She said to me that when she attends meetings there are very
few women, if any, around the table.
She thinks, ``Well it will be ok because I am at the table, I know
these people, I've worked with them and I make a pretty good living--so
why do I still feel the subtle discrimination--and then I realized
why.'' She continued, ``It's because I am not like them, I will never
be like them, I am different and they don't understand the importance
of that.''
I have thought about her statement a lot and I believe this
awareness should empower her and other women owned businesses, because
they contribute and make better an industry that is vital to our
country's daily life. And it also why diversity is so important in the
highway industry and in our nation. Our diversity is what strengthens
and binds us together. We are a government for all the people and all
of our people deserve a chance to compete and to contribute.
Statement of the American Road & Transportation Builders Association,
Submitted for the Record by Hon. Sam Graves of Missouri
Chair DeFazio and Ranking Member Graves, thank you for allowing the
American Road & Transportation Builders Association (ARTBA) to offer
our views as part of today's hearing on the Disadvantaged Business
Enterprise (DBE) Program.
Established in 1902, ARTBA is the oldest national transportation
construction-related association. ARTBA's more than 8,000 members
include public agencies and private firms and organizations that own,
plan, design, supply and construct transportation projects throughout
the country and world. The industry we represent generates more than
$500 billion annually in U.S. economic activity and sustains more than
4 million American jobs.
In the midst of the current pandemic, ARTBA remains a steadfast
advocate for increased federal transportation investment. Given
additional resources, the transportation construction industry can help
lead the nation's economic recovery. It is important to view the DBE
program--and its potential opportunities--in this context.
Compliance with the DBE program, which has been in place for nearly
40 years, is a key task for transportation agencies and contractors on
federal-aid transportation projects. The program's purposes include
developing DBE firms and ensuring a level playing field in contracting
for federal-aid projects. As with other regulatory requirements, the
transportation construction industry seeks to comply with the DBE
program rule while carrying out its core objective of delivering
projects in an efficient, timely and safe manner. Moreover, the
integrity of the DBE program is critical.
While Congress authorizes and establishes parameters for the DBE
program, the U.S. Department of Transportation (USDOT), its modal
administrations, and state and local transportation agencies are
responsible for the program's implementation. This includes USDOT
rulemaking and issuance of guidance, in which the industry always
maintains great interest. Our submission today references a number of
these administrative actions and policies. While we know the committee
wants to stay abreast of these activities because of its oversight
responsibilities, we also hope you consider our proposed improvements
as potential future legislative provisions, such as in the next surface
transportation reauthorization bill.
We seek to highlight ways in which the DBE program can be run more
efficiently and effectively, including for the benefit of those
emerging businesses for which the program was developed. Similarly, we
point out specific aspects of the current DBE rule and guidance where
the opposite often results. We are informed in our comments by examples
of collaborative efforts to structure and implement state-level DBE
programs around the country, in which various ARTBA members and
affiliated chapters have participated.
In describing our proposed improvements, we cite (with page
numbers) USDOT's DBE guidance entitled ``Official Questions and Answers
(Q&A's) Disadvantaged Business Enterprise Program Regulation (49 CFR
26),'' dated April 25, 2018 (and referred to as the ``guidance'' or
``Q&A''); and one of its addenda, the single-page ``Procedures for
Submitting Good Faith Efforts Information on Design-Bid-Build
Contracts,'' dated June 20, 2018.
Our four primary themes are the following: 1.) identification of
policies that diverge markedly from customary and efficient industry
practices, which can add project costs and sometimes work to the
detriment of DBE firms themselves, 2.) inconsistencies in USDOT's
adherence to its own DBE guidance document, which explicitly advises
recipient-agencies to craft aspects of their DBE programs using
``information about the real world of contracting in the recipient's
contracting area,'' because ``[r]ecipients know their own markets'' [p.
61]; 3.) lack of meaningful consultation with the industry and other
legitimate stakeholders about important policy changes; and 4.) failure
to modernize the DBE guidance to reflect evolving business practices in
the industry (especially those involving emerging technologies), with
numerous Q&A sections dating back to the previous century. ARTBA hopes
to see a collaborative effort to improve DBE program implementation in
these respects.
Good Faith Effort and Submission of DBE Commitments
USDOT conducted a significant DBE rulemaking in 2012-14, issuing
its final rule on October 2, 2014 (79 CFR 59565). A key and contentious
issue was the department's initial proposal to abolish the longstanding
``responsibility'' option, through which recipient-agencies had the
option of accepting DBE utilization plans from bidders (or sometimes
just the apparent low bidder) within a reasonable number of days after
the bid on design-bid-build projects. Had the department stayed with
its original position, as ARTBA and numerous other commenters noted,
prime contractors and DBE subcontractors, among others, would have been
overwhelmed with the mandate to gather or submit quotes for numerous
projects at the same time, many/most/all of which would be for projects
in which they would not eventually participate, which is the nature of
the letting process. The potential for added administrative costs was
obvious. For example, at the time of the rulemaking, Illinois had a
state ``no cure'' law similar to USDOT's proposed provision. While
Illinois' law was in effect, fewer projects met the DBE goal. Worse
yet, some DBE subcontractors overcommitted themselves during the
bidding process, leading to their demise.
Ultimately, to the great relief of industry and many recipients,
the department settled on a maximum seven-day window (later to be
shortened to five days) for the submission of DBE commitments under the
responsibility option. To the best of our knowledge, in a series of
written, audio and video communications rolling out the DBE rule
changes in late 2014 and early 2015, no one from USDOT averred
recipients would now need to require all bidders to submit their DBE
commitments in all circumstances. The practice among the states would
continue to vary permissibly, in that some states only required this
information from the lowest apparent bidder, others the lowest two
bidders, and so forth.
In fact, in the publication of its final rule in 2014, USDOT
described the responsibility option as follows: ``We think it
reasonable ultimately to limit the time to a maximum of 5 calendar days
to protect program beneficiaries and overall program integrity.'' In a
related footnote, ``Due to the definition of `days' adopted in this
final rule, bidders or offerors will have 5 calendar days (i.e., not
business days) to submit the necessary information. Thus, if a bid is
submitted on Thursday, the apparent low bidder would have until Tuesday
to submit the information'' [emphasis added].
It was therefore shocking and disappointing when the department
issued a one-page guidance on June 20, 2018, ordering that on design-
bid-build contracts, ``all bidders . . . submit credible documentation
of DBE commitments and/or good faith efforts either with their sealed
bid, as a matter of responsiveness; or no later than five days after
bid opening, as a matter of responsibility'' [emphasis in original].
Department officials have since contended this revised guidance was not
a change in policy, but a restated means of reviewing the performance
of all bidders and their respective good faith efforts. Under that
reasoning, the pronouncements made upon publication of the final rule
were misleading and/or opaque--whether intentional or not. (On at least
two occasions, a department official publicly stated or implied
recipients could maintain current options for implementing the
responsibility approach, if they abided by the newly-prescribed time
limit.)
It is puzzling the department would let 1,357 days (or three years,
eight months and 18 days) elapse between publication of its final rule
and this supposed clarification of related, existing policy. (If it was
part of longstanding policy, why not make that clear while rolling out
the rule changes?) Had ARTBA and other stakeholders been given the
opportunity to submit public comments, we would have made a compelling
argument this change in policy will add costs to many projects, in
direct contravention of the administration's regulatory reform
principles.
To be certain, implementation of this good faith effort guidance
provision will increase project costs in a number of states. In the
past, we have seen this draconian approach result in fewer bidders
among prime contractors, DBE contractors' quoting too few projects (for
fear of overcommitment) or too many (sometimes leading to their
dissolution) and decreased achievement of DBE project goals. In 2013,
ARTBA facilitated a survey of nearly 300 transportation construction
contractors, who overwhelmingly anticipated the proposed new DBE
regulations (such as one similar to the 2018 guidance) would increase
the cost of projects because of added compliance burdens.
Moreover, proponents of the ``all bidders'' approach ignore--and
have no coherent response for--the fact that most DBE firms (which are
small businesses, and often start-ups) do not have the capacity to
provide quotes for a large number of projects at the same time, as part
of the same letting, especially given the likelihood they will
participate in just a few of them, at best.
It is also troubling that USDOT has forced this ``misguidance''
provision on recipient-agencies and contracting communities in states
with DBE programs considered successful and effective by all parties.
USDOT should reverse this back-door rulemaking and work with all
parties--including DBE and non-DBE contractors--to address any concerns
that led to its adoption in the first place. That is far preferable to
the department's issuing mandates in conflict with its own rules.
Good Faith Effort Parameters
After nearly four decades, the DBE rule and guidance still do not
provide objective descriptions of good faith efforts to be undertaken
by prime contractors. USDOT should compile examples of successful good
faith effort practices nationwide, which would function similarly to
case law in the legal realm. At the same time, while the department
advises that prime contractors need not accept DBE subcontractors'
prices which are ``excessive or unreasonable,'' the guidance has never
provided insight as to how to define those terms.
ARTBA members have noted examples of recipient-agencies in their
respective markets that do not maintain current or accurate databases
or lists of DBE firms actually ready, willing and able (as the rule
states) to participate in a transportation project. These lists--if
they exist at all--commonly include firms in disciplines unrelated to
transportation or construction, not qualified or certified to work on a
project for that agency, or out of business or unreachable. The related
concept of ``potential DBEs,'' as used in assessing good faith effort
or setting overall DBE goals in a jurisdiction, strains the limits of
credulity.
For all these reasons, USDOT should direct recipients to compile
and maintain information for legitimate and relevant DBE firms. The
current rule also suggests a prime contractor use the services of
community organizations and business assistance offices as part of its
good faith effort. That role is more properly assigned to the
recipient, for the benefit of all prime contractors and DBE firms.
Prompt Payment and Retainage
There have been ongoing concerns that the USDOT guidance on prompt
payment and retainage (pp. 4-9) does not reflect the ``real world of
contracting.'' In the recent past, ARTBA members reported a development
at the state level, in which prime contractors were prohibited from
withholding funds for a DBE subcontractor's pro-rated bond, as well as
their state/local association dues. This prevents a common industry
practice and puts affected DBE subcontractors at a disadvantage, in
that their non-DBE counterparts are able to address surety protection
and association membership as part of the contractual relationship with
their prime contractor. To address this and related prompt payment
issues, we suggest a collaborative effort with recipients and industry
to better understand everyone's respective views of the payment
process.
Prime Contractor/DBE Subcontractor Relationship
In some notable cases, the department's Q&A prohibits DBE credit
for that firm's carrying out customary and efficient industry
practices. Generally, the cost of equipment purchased or leased by a
DBE subcontractor from a prime contractor does not count for DBE credit
(p. 12). (Similarly, materials purchased from a prime contractor do not
count either.) Given that it is common for ``primes and subs'' to
undertake these types of transactions, the rule and guidance actually
put DBE firms at a disadvantage in this regard. Industry has long made
the point that materials suppliers may be limited in a given geographic
area, and as a result it may be necessary for a prime contractor, who
is also the sole/dominant supplier there, to sell material to the DBE
subcontractor. The DBE rule should stop ignoring the realities of that
circumstance, and instead allow counting of the material for DBE credit
when appropriate.
USDOT's Q&A also directs prime contractors to consult with their
recipient-agency about the appropriateness of their relationship with a
DBE subcontractor. Unfortunately, the recipient's assessment can count
for little or nothing should law enforcement question the relationship
at a future time. A future legislative revision to the DBE program
should designate these agency assessments as a safe harbor for the
contracting parties should they follow the agency's parameters.
Regular Dealers
In another issue addressed in the 2012-14 rulemaking, the
department initially explored abolishing the regular dealer designation
for DBE firms. The final rule mandated those firms' status would be
determined on a project-by-project basis.
The Q&A betrays a strong presumption that drop shipment of supplies
or materials to a project site downgrades a DBE supplier's status from
regular dealer to that of expediter or broker. In that case, the prime
contractor may not count any of the materials cost (other than the DBE
firm's commission) for DBE credit, and the practice also calls into
question the subcontractor's commercially useful function.
This viewpoint is outdated and shows unawareness of current
business practices in the industry, in which emerging technologies and
efficiencies continue to develop. The ``case-by-case'' approach is also
excessively subjective and puts this determination in the hands of
perhaps one agency official.
In recent years, USDOT has conducted at least one ``listening
session'' on the regular dealer issue, but limited the number of
participants and did not include a representative cross-section of the
industry. The department should commit to improving this 2014 provision
to reflect the decade (and century) we are in, while collaborating with
all interested stakeholders in doing so.
Commercially Useful Function
This section of the USDOT Q&A (pp. 40-42) addresses the requirement
for DBE firms to meaningfully participate in a project, rather than
assuming a role contrived so DBE goals can be achieved. Again, however,
the guidance does not capture current industry practices and potential
roles on a transportation improvement project. The material in this
section dates back to 1999 and 2012. Technology and other developments
have created new opportunities and potential responsibilities for
subcontractors, DBE and otherwise. (One example of many is a social
media coordinator for a major project, where public communications are
vital.) The department should initiate a dialogue with industry to
bring this section up to date.
Joint Checks
It is common industry practice for a prime contractor to issue a
check jointly to its first-tier subcontractor and that subcontractor's
material supplier. Joint checks are used regardless of a subcontractor
or supplier's status as a DBE. Many such firms prefer this method of
payment. Yet USDOT's DBE Q&A deems the use of joint checks as a `` `red
flag' calling for further scrutiny.'' Again, the department should make
an effort to better understand typical industry transactions and not
approach this practice with a presumption of guilt.
Mentor-Protege Programs
More than 20 years ago, the department's Q&A recognized the use of
mentor-protege programs in DBE development. Many members of the
industry--including emerging DBE firms--believe in their value as well.
However, USDOT's guidance provides virtually no direction as to the
permissible structure of such a program, instead giving responsibility
to the private sector. Prime contractors may have little incentive to
participate, especially considering the legal risk they may incur if
law enforcement later accuses the parties of an improper relationship
that undercuts the DBE firm's commercially useful function.
A better approach would be directing recipients to initiate mentor-
protege programs in consultation with the industry in their market.
Again, the department should compile permissible practices for all to
see, and stand behind them as a legal safe harbor for program
participants.
Alternative Contracting & Procurement Methods
In 2018, the Federal Highway Administration's Office of Civil
Rights published the ``Disadvantaged Business Enterprise Program
Administration and Oversight on Projects with Alternative Contracting &
Procurement Methods Handbook.'' A major premise of the document is that
planning and implementing DBE compliance on design-build and similar
projects, where the scope and specifics of subcontracting opportunities
evolve over its life, require a more collaborative and flexible
approach than for ``design-bid-build'' projects. However, ARTBA
believes some of the same methods outlined in the handbook would also
be appropriate for use in many such ``traditional'' projects. We hope
to explore wider use of these innovations with the agency when
possible.
Government Accountability Office (GAO) Study
ARTBA, various members of this committee, and others involved in
today's hearing have pointed out shortcomings of and potential
improvements for the DBE program. This is an opportune time for the
Government Accountability Office (GAO) to conduct a study of the DBE
program's first four decades, focused on assessing the program's
fulfillment of its stated purposes and recommendations for program
improvements to achieve its desired outcomes. In carrying out the
study, the GAO should seek a full range of stakeholder views.
ARTBA suggests that this committee include direction for this GAO
study in its next draft of surface transportation reauthorization
legislation. It will serve as a catalyst for all interested
stakeholders--including the U.S. Department of Transportation, state
agencies, contractors and the minority- and women-owned business
communities--to collaborate on improving the DBE program's efficiency
and effectiveness.
Conclusion
By exploring and incorporating the improvements described above,
the DBE program can be a more productive component of federal-aid
transportation programs that maximize business opportunities and put
Americans to work, while operating with efficiency and integrity. We
appreciate this committee's consideration of ARTBA's views and hope to
engage in a continuing dialogue as the surface transportation
reauthorization process moves forward.
Letter of October 7, 2020, from James V. Christianson, Vice President,
Government Relations, Associated General Contractors of America,
Submitted for the Record by Hon. Sam Graves of Missouri
October 7, 2020.
Hon. Peter DeFazio,
Chairman,
Committee on Transportation, United States House of Representatives,
Washington, DC.
Hon. Sam Graves,
Ranking Member,
Committee on Transportation, United States House of Representatives,
Washington, DC.
RE: Hearing entitled, ``Driving Equity: The U.S. Department of
Transportation's Disadvantaged Business Enterprise Program''
Dear Chairman DeFazio and Ranking Member Graves:
On behalf of the Associated General Contractors of America (AGC or
Association)--the leading association in the construction industry
representing more than 27,000 firms, including America's leading
general contractors and specialty-contracting firms--thank you holding
the important hearing entitled: ``Driving Equity: The U.S. Department
of Transportation's Disadvantaged Business Enterprise Program.'' AGC
respectfully puts forward the following comments on fostering diversity
and inclusion in the construction industry and recommendations for the
U.S. Department of Transportation's (U.S. DOT) Disadvantaged Business
Enterprise (DBE) program.
The Construction Industry
The construction industry is large, diverse, and fragmented. In
2018, the construction industry had 733,689 firms and 6,814,979 million
paid employees. In that same year, ninety-one percent (666,697) of
construction firms had fewer than 20 employees; one percent (8,666) of
construction firms had 100 or more employees; the average construction
firm had fewer than 9 employees.\1\
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\1\ All Sectors: County Business Patterns by Legal Form of
Organization and Employment Size Class for U.S., States, and Selected
Geographies: 2018. U.S. Census Bureau. https://rb.gy/xtybhe (link
shortened). Accessed: October 1, 2020.
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As with other industries, construction is not free of
discrimination. However, construction is an intensely competitive
industry and that competition penalizes any company that resorts to
discrimination. The unique nature of the construction bidding process
can also help prevent discrimination from occurring. Most public owners
are subject to legal requirements for open competitive bidding, which
typically include a publicly announced deadline for the submission of
sealed bids, the public opening of the bids, and contract award to the
lowest responsive and responsible bidder, eliminating the ability for
public owners to engage in unlawful discrimination. The resulting
pressure on prime contractors makes it necessary to select
subcontractors based on experience, price, and quality.
Diversity and Inclusion
Nevertheless, AGC is committed to fostering a business climate that
enhances opportunities for all companies and employees in the
construction industry. AGC fully embraces diversity among its employees
and within its membership. People of diverse backgrounds, opinions,
perspectives, experiences, and ideas bring creativity and vitality that
maximizes member engagement at all levels of the Association. Fostering
an environment that is welcoming and inclusive to all individuals is
essential to achieving the Association's mission and places members in
a position to contribute to the construction industry's future success.
In furtherance of this commitment, AGC undertook several efforts over
the years, many of which are ongoing. Some of these efforts are
described in further detail below.
Established a Diversity and Inclusion Council (Council)
within AGC in 2017. The goal of the Council is to foster an environment
both in the Association and in the industry that is welcoming and
inclusive to all individuals regardless of one's background, opinions,
perspectives, experiences, or ideas. A key strategy of the Council's is
to identify barriers that prevent individuals from underrepresented
groups from pursuing a career in construction and developing resources
to eliminate those roadblocks.
Authored and released a report, titled ``The Business
Case for Diversity & Inclusion in the Construction Industry,'' that
outlines six reasons why diversity and inclusion are strategically
valuable in generating corporate/industry innovation, increasing
profitability, and ensuring a positive and sustaining legacy of
progress for a company.
Partnered with AGC of Washington to create an initiative
called the Culture of CARE. Launched nationwide in March 2020, the
Culture of CARE seeks to advance the construction industry as the
industry of choice for diverse and talented workers by building
inclusive work environments in construction firms nationwide. The
Culture of CARE is built on four principles \2\. There are two ways to
participate in the Culture of CARE. The first is that a company can
commit to a Culture of CARE by signing the company pledge. The second
is that an employee can sign an individual pledge. To date,
approximately 375 companies and 950 individuals took the pledge. Upon
taking the pledge, there are resources available to a company such as
tools to communicate a company's pledge, a model human resources policy
and best practices, and kits for toolbox talks, with additional
resources continuing to be developed.
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\2\ Culture of CARE's four principles: (1) commit to hire and pay
based on skill and experience regardless of age, ethnicity, gender
identity, nationality, race, religion, sex, or sexual orientation; (2)
attract prospective employees by creating inclusive workplaces that are
free from harassment, hazing and bullying; (3) retain high-performing
employees by identifying and removing barriers to advancement; and (4)
empower every employee to promote a culture of diversity and inclusion.
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Created the annual Diversity and Inclusion Excellence
Awards in 2018 to honor AGC members that are champions in advancing
diversity and fostering a culture of inclusion within their workforce,
supply chain, and in the communities they serve. By showcasing and
recognizing best practices from companies that are developing and
delivering diversity and inclusion initiatives with demonstrable
success, award winners have the opportunity to share their track record
of achievement and commitment, which will help spur other companies to
establish or improve their own initiatives.
DBE Program
The DBE program (or program) plays a pivotal role in fostering
diversity and inclusion in the construction industry by ensuring that
certified small businesses owned and controlled by socially and
economically disadvantaged individuals can compete for federally funded
highway, public transit, and airport projects. The program was
originally established by regulation in 1980. In the years since,
Congress included provisions in certain transportation laws that
established goals for a certain amount of federal funding to be
expended through DBEs.
Most recently, Congress continued the goal that not less than 10
percent of certain federal funding, including funding for highways and
public transit projects, be expended through DBEs in the Fixing
America's Surface Transportation Act (FAST Act; P.L. 114-94). In
addition, the FAST Act authorized up to $10 million of the total amount
authorized for the administrative expenses of the Federal Highway
Administration each fiscal year to be used for the Disadvantaged
Business Enterprises-Supportive Services (DBE-SS) program. The Federal
Aviation Administration Reauthorization Act of 2018 (FAA
Reauthorization Act of 2018; P.L. 115-254) continued the goal that at
least 10 percent of certain federal funding for airports be expended
through DBEs or qualified HUBZone small business. Notably, it also
amended the definition of a ``small business concern'' for the
construction industry, tying it to the ``size standard for the North
American Industry Classification System Code 237310, as adjusted by the
Small Business Administration'' for the purposes of the DBE program.
The DBE program and associated goals are administered by the
Departmental Office of Civil Rights, the relevant modal administrations
within U.S. DOT, and recipients of certain federal funding.
The Challenges and Recommendations:
First and foremost, AGC supports the continuation of the DBE
program. As with any federal program, there are important improvements
to the DBE program that should be made to ensure its continued success.
AGC is having ongoing conversations with its members to develop both
legislative and regulatory recommendations to help improve the DBE
program. In the near-term, AGC respectfully urges the Committee to
consider the following recommendations.
Definition of a ``Small Business Concern''
Challenge: To meet the definition of a ``small business concern''
for the purpose of the DBE program for federal highway and public
transit funding a company's average annual gross receipts during the
preceding three fiscal years must not exceed $23,980,000, under the
FAST Act. The amount is adjusted annually for inflation by the
Secretary of Transportation. The amount was previously $22,410,000,
adjusted annually for inflation, under the Moving Ahead for Progress in
the 21st Century Act (P.L. 112-141). This definition limits the ability
of DBEs to grow their companies into sustainable, long-term businesses.
Instead, the definition can force DBEs out of the program prematurely
or require a DBE to sell off a part of their business. When this
occurs, the capacity of certified DBEs in a state dwindles, making it
difficult to achieve DBE goals, which undermines the very intent of the
DBE program.
Recommendation: Congress should amend the definition of a
``small business concern'' for the purposes of the DBE program.
Specifically, the definition should provide for a significant
increase in the annual gross revenue receipts during the
preceding three fiscal years. This new amount should continue
to be adjusted for inflation. The increase will help ensure
that DBEs that exceed the amount are more likely to succeed
outside of the DBE program and it will help address capacity
issues.
Reciprocity of DBE Certifications
Challenge: Prior to being eligible to participate in a state's DBE
program, a company must go through a rigorous certification process.
The company bears the ``burden of demonstrating to you, by a
preponderance of evidence, that it meets the requirements of this
subpart concerning group membership or individual disadvantage,
business size, ownership, and control'' (49 CFR 26.61). Federal
regulations (49 CFR 26 Subparts D and E) set forth the standards and
procedures for making a certification decision for an applicant company
by a state certification agency.
Once a company is certified as a DBE, it remains certified until or
unless a state certification agency removes its certification in whole
or in part through a separate process outlined in federal regulations.
A state certification agency cannot require a certified DBE to reapply
for certification or undergo a re-certification process. However, a
state certification agency may conduct a certification review of a DBE
if appropriate. A certified DBE is required to inform a state
certification agency of any changes to its circumstances (i.e.,
disadvantaged or economic status) that affect its ability to meet
federal requirements or its application and it must provide a state
certification agency with a sworn affidavit on an annual basis that
affirms that there have not been any changes to the company's
circumstances.
While the federal regulations allow for a state certification
agency to accept another state's certification of a DBE, there is
discretion given to a state certification agency in terms of accepting
that certification (49 CFR 26.85) and the process for doing so is also
rigorous. The lack of direct reciprocity for states' DBE certifications
artificially limits the ability of DBEs to expand their businesses. In
addition, it hinders the ability for a prime contractor to address any
capacity constraints in a state that impacts its ability to meet DBE
goals.
Recommendation: Congress should facilitate increased
reciprocity of DBE certifications between states by
establishing in law a streamlined process through which a state
certification agency must accept another state's certification,
which is in keeping with the Uniform Certification Program that
allows for a DBE certification to be honored by all recipients
in a state. The process should provide for an exception in the
event that the state certification agency can demonstrate good
cause for rejecting another state's certification.
Business Development and Supportive Services
Challenge: The DBE-SS program (23 USC 140 (c)) provides training,
assistance, and services to DBEs with the objective of furthering the
development of their companies. As previously noted, Congress
authorized up to $10 million each fiscal year for the DBE-SS program.
While federal regulations provide guidance regarding the types of
training, assistance, and services that should be provided (23 CFR 230
Subpart B) and allow a recipient to establish their own business
development program (49 CFR 26.35), these well-intentioned efforts can
fall short of effectively supporting DBEs. AGC members are concerned
that emphasis on certain services is misplaced and that the consultants
hired by recipients to offer services can miss the mark.
Recommendation: Congress should reinvigorate the DBE-SS program
to ensure that it focuses on providing the education, training,
technical assistance, and services that bolster the success of
DBEs. Specifically, Congress should place an emphasis on
securing financial and bonding services, certification
assistance, bidding and estimating, increasing awareness of and
compliance with federal requirements for projects, and
procuring new equipment and technologies. In addition, Congress
should ensure that consultants hired to provide any of these
resources are have appropriate technical and industry
expertise. Finally, Congress should continue to provide funding
for the DBE-SS program.
Administration of the DBE Program
Challenge: The DBE program evolved over the years through various
legislative and regulatory changes. AGC members remain concerned with
the interpretation of the requirements of the DBE program. In addition,
there is not always uniformity in the way the recipients administer the
requirements through their respective programs. The construction
industry wants to ensure the success of the DBE program. However, the
uncertainty and confusion associated with the DBE program's
requirements, which is in part due to issues with the program's
regulations and guidance, poses a real concern for all contractors.
Contractors found to be in violation of the DBE program's requirements
can face suspension, debarment, or civil and/or criminal prosecution--
any of these can put a company out of business and a business owner in
prison.
Recommendation: Congress should initiate a thorough and
balanced review of the DBE program. The review should focus on
the administration of the program, rely on quantitative and
qualitative analyses, and provide ample opportunities for input
from all affected or interested parties. The review should also
include recommendations for Congress and U.S. DOT's
consideration that will ensure the continued success of DBE
program in the future.
Conclusion
Again, AGC thanks the Committee for holding this important hearing
and looks forward to working with the Committee as works to ensure the
continued success of the DBE program.
Sincerely,
James V. Christianson,
Vice President, Government Relations, Associated General
Contractors of America.
Statement of the Airport Restaurant and Retail Association, Submitted
for the Record by Hon. Rick Larsen
Mr. Chairman and Members of the Committee:
Thank you for holding this hearing today. The Airport Restaurant &
Retail Association (ARRA), representing the businesses, including many
small, minority and women owned Airport Concession Disadvantaged
Business Enterprises (ACDBEs), that operate the retail stores and
restaurants serving airports and air travelers nationwide, is seeking
your support to ensure the Disadvantaged Business Enterprise (DBE)
Program and the ACDBE Program continue and that the ACDBE companies
survive this unprecedented air-traffic downturn due to the COVID-19
pandemic. This hearing, focusing on the DBE Program at the Department
of Transportation (DOT), is well timed. While we are writing to
emphasize that there is a continuing need and compelling government
interest in the federal DBE and ACDBE programs and register our strong
support thereof, our message today is that unless Congress acts
quickly, many of these companies and these programs may not have a
future. Without immediate aid, many DBEs and ACDBEs and the important
benefits these programs provide our nation's airports, highway and
public infrastructure will be lost. It is that simple.
The DBE program is essential to remedy discrimination and its
effects on women- and minority-owned businesses while ensuring
all businesses can compete for Federal transportation dollars
on a level playing field.
DOT's DBE program, since its inception, has been devoted to
combatting discrimination, and the continuing effects of past
discrimination, in federally assisted highway, transit and airport
programs and projects. ARRA fully supports the core goals and
objectives of the DBE program, which are to level the playing field by
providing small businesses, like the airport concessionaires within our
membership, that are owned and controlled by socially and economically
disadvantaged individuals, with fair and significant opportunities to
compete for federally funded transportation contracts and compete in
contracting and business opportunities.
The ACDBE program has been instrumental in providing opportunities
for small minority and women owned disadvantaged companies to
participate in the aviation industry and the airport concessions
business. Airports are very challenging environments in which to start
up and operate a business. These companies face large upfront capital
expenditures, high construction costs, limited access to capital, high
rents and minimum annual guarantees (MAGs) that are required to operate
in airport spaces, and higher operating costs due to the federally
regulated safety and security requirements at airports.
Even with the DBE/ACDBE programs the barriers to entry are many and
substantial. The challenge of survival has never been greater than it
is now during the COVID-19 pandemic. While ACDBEs have grown under the
Department of Transportation and Federal Aviation Administration's
guidance and oversight, and opportunities expanded during the period of
continuous growth of air travel, we now face a real threat to the ACDBE
program and many small companies and individual owners/operators.
Operating within the heavily restricted airport environment,
airport concessionaires are highly dependent on passenger traffic for
their customers and sales. After a period of record passenger growth,
within only a few months the pandemic cost airports and their
concessionaires about 95% of their passengers and business.
Concessionaires were forced to furlough 80-95% of their employees,
close the vast majority of their stores and drastically reduce
operations for those few that were able to continue operating. Unlike
other restaurants and retail operators, airport concessionaires cannot
conduct business with the general public outside the airport
environment, and thus have not been able to sustain any business
through drive-thru, delivery or carry-out sales. They are totally
captive to the number of air travelers at the airport.
Unless Congress acts quickly to provide immediate aid, many of
the DBE/ACDBE companies, the program itself and the important
benefits these programs provide our nation's airports, highway
and public infrastructure will be lost.
In talking to our members around the country and in every airport,
the story is the same. Business has effectively come to a standstill
and passengers won't return until people feel comfortable and safe
traveling again.
Airline travel has been devastated by the COVID-19 pandemic, and
the restaurant and retail airport industry has been particularly
impacted. We have experienced, and continue to experience, mounting
losses in jobs and revenues. Beyond air carriers and airport operators,
our members, airport concessionaires, are the third major partner in
the aviation ecosystem that serve air travelers. Airport
concessionaires completely transform empty airport terminals into
vibrant shopping and dining destinations that enhance the travel
experience, generate $10B in sales annually and employ more than
125,000 workers in steady jobs that provide good pay and benefits and
opportunities for advancement. Moreover, airport concessionaires
contribute $2.5B in non-aeronautical revenue to airports (approximately
10% of all airport operating revenues) under contracts and agreements
that deliver services that travelers and airports need and fuel airport
operations, development, bond financing, and growth.
For our members to survive, and continue to make the DOT DBE/ACDBE
program vibrant and effective, we need at minimum:
$3.5B in relief for airport concessionaires; and
$10B for airports in the next COVID-19 package.
It is vital that these funds be added to any final negotiated
legislation on COVID-19 relief. ARRA, together with the Airport
Minority Advisory Council (AMAC), the International Association of
Airport Duty Free Stores (IAADFS), the American Car Rental Association
(ACRA) and the National Parking Association (NPA), along with the
airport trade associations--the Airports Council International-North
America (ACI-NA) and the American Association of Airport Executives
(AAAE)--are united in requesting at least $13.5B in grants to airports,
with $3.5B dedicated to support Minimum Annual Guarantee (MAG) and rent
abatement for airport concessionaires at airports across the country.
In our reports (attached for the hearing record) Facing Facts: The
Survival and Revival of Shopping and Retail Concessions at Airports,
ARRA demonstrates that concessionaires cannot survive at current
traffic levels and have little chance until passenger traffic returns
to near pre-pandemic levels. Airport restaurant and retail
concessionaires will lose an estimated $3.4B between now and the end of
2021. In the next 18 months, they will lose 3 years of profit.
Most airline, FAA and industry projections show that it will be at
least 18-36 months, and possibly five years, before the aviation
industry returns to normal. Without immediate federal relief, many DBE/
ACDBEs and other concessionaires will not survive. Since these
companies operate in a highly restricted and federally regulated
airport environment, they will live or die based on government
policies, travel restrictions, airline schedules, public confidence in
the health safety of air travel and other factors over which they have
no control--including whether the Congress appropriates targeted relief
funding.
Airport concessionaires include more than 3,500 small minority and
women-owned businesses who operate under the Congressionally authorized
ACDBE program, which is administered by DOT/FAA. These businesses'
survival is threatened by the pandemic's disproportionate negative
impact on them. Our fear is that many airport concessionaires will fail
to weather this storm without significant financial assistance from the
federal government and relief from airport rents and MAG payments. Air
travel demand must increase substantially beyond what it is now for
airport concessionaires to generate sufficient revenue, meet airport
rent obligations, pay debt service and rebound as the key component of
the aviation system that they were prior to the pandemic.
The CARES Act (Phase III) provided passenger air carriers with $50B
and air cargo carriers with $8B. Airports received $10B and air carrier
associated contractors received $3B in immediate financial aid and for
future recovery. Airport concessionaires received $0.
The $3.5B and the additional $10B airports and concessionaires are
requesting are vital to the airport community, and we urge you to
ensure that it is included in any legislation aiding the industry.
These funds will help sustain airports and speed their recovery by
helping them offset the drastic loss of operating revenue, meet debt
service obligations and provide MAG and rent abatement to airport
concessionaires. The requested $3.5B for airport concessionaires MAG
and rent abatement is the first step in assuring companies survive in
the short term but like the airlines and airports, many ACDBEs and
airport restaurant and retail concessionaires will also need additional
financial assistance for continuing operating expenses, debt payments,
and reopening and rehiring employees to be part of the airport and
aviation industry's recovery. ARRA is supportive of programs such as
the Payroll Protection Program (PPP) and Main Street Lending Program
(MSLP), however these programs are not designed and do not meet the
needs of airport concessionaires given their unique circumstances and
operating characteristics. We support improvements to these programs
that are designed to enable ACDBEs and concessionaires to benefit, and
other legislative and administrative initiatives to give airport
concessionaires, and ACDBEs in particular, better access to federal
grants and no- or low-interest loan programs, such as SBA and MSLP
lending programs and other forms of financial assistance.
The requested $13.5B for airport and airport concessions relief--
necessary to help airports and concessionaires survive the months
ahead--in combination with additional grants and loan programs targeted
for airport concessionaires, will help ensure the continued vitality
and survival of DOT's ACDBE program. ACDBE firms and concessionaires at
airports across the country desperately need the support of Congress in
order to assure the survival and speedy recovery of our industry and
the nation's economy.
We are submitting this statement both to voice our strong support
for the DBE and ACDBE programs and to urge Congress to pass financial
relief and assistance specifically for airport restaurateurs and
retailers and ACDBEs given the unprecedented and disastrous long-term
business impact caused by the pandemic. We are also attaching for the
record the statements and testimonials of individual ACDBE companies in
strong support of the DBE/ACDBE program. If airport concessionaires do
not receive this immediate critical relief, many will cease to exist
and this critical program will disappear.
For these reasons, ARRA urges Congress to SAVE OUR INDUSTRY and
include financial relief and direct assistance to airport
concessionaires as it works to mitigate the severe economic and public
health impacts of this unprecedented pandemic.
Thank you.
About ARRA
ARRA represents the companies who operate restaurant and retail
stores and shops at airports across the U.S. More than 80% of ARRA
Members are ACDBEs--small minority and women-owned businesses. ARRA's
mission is to work collaboratively with the airport community and the
aviation industry on matters of policy decision-making, with a
collective impact on restaurant and retail operators, and also to
empower small, minority, women-owned, and disadvantaged businesses to
participate in and contribute to the aviation industry.
attachments
Letters and testimonial statements from ACDBE companies
[The letters and testimonials are retained in committee files.]
ARRA Reports: ``Facing Facts 2: The Survival and Revival of Airport
Shopping and Dining--July 2020''
[This report is available online at https://www.arra-airports.com/
uploads/1/3/2/1/
132108975/arra_facing_facts_2_the_survival_and_revival_of_airport_
shopping_and_dining.pdf and is retained in committee files.]
``Facing Facts: The Survival of Airport Shopping and Dining--June
2020''
[This report is available online at https://www.arra-airports.com/
uploads/1/3/2/1/
132108975/microsoft_word_-_final_arra_10_facts_.pdf and is retained in
committee files.]
Appendix
----------
Question from Hon. Troy Balderson to Sandy-Michael E. McDonald,
Director, Office of Economic and Small Business Development, Broward
County, Florida
Question 1. Federal and state Miller Acts help protect
subcontractors against loss by requiring payment and performance bonds
for infrastructure projects. However, some delivery methods, including
public-private partnerships do not require the same levels of
protection. To help ensure these protections are in place, Rep. Lynch
and I introduced H.R. 6359, the Promoting Infrastructure by Protecting
Our Subcontractor and Taxpayers Act, which would ensure that these
protections are applied to TIFIA finance projects. A recent Op-ed from
in the Daily Kos, ``Protecting the Builders Rebuilding America,'' from
Wendell Stemley, the Emeritus Director of the National Association of
Minority Contractors, spoke in support of H.R.6359, specifically the
benefits of ensuring proper payment and performance security is in
place on infrastructure projects to protect subcontractors, including
Disadvantaged Business Enterprise program participants.
We believe these requirements are needed now more than ever as
states are cancelling transportation projects due to the reduced
funding. This puts additional risk on contractors' financial solvency,
and therefore adds risk to subcontractors that are part of those
projects.
Can you speak to the importance of having these protections in
place for DBE's that are subcontracted on large scale multimillion-
dollar infrastructure projects if the lead contractor falls into
insolvency or experiences financial difficulty, and is unable to
complete the project?
Answer. Thank you for the question you provided and the opportunity
to respond to what I believe is another substantive opportunity to
support our DBE's.
One of the main reasons small businesses fail is due to a lack of
access to capital. According to Forbes \1\, it is the number two reason
small businesses or entrepreneurs go out of business--Access to
Capital. Unfortunately, many entrepreneurs and small businesses with
good plans, innovative ideas and genuine intentions, fall short due to
running out of cash and not being able to access capital. This also
holds true when you take into consideration the obligations and risk
that is taken on every day by the Minority and Woman Owned Businesses
who serve as our Disadvantaged Business Enterprises (DBEs) under
Department of Transportation (DOT) contracts. If they are successful in
navigating the typical roadblocks of starting a business, they must
then be able to maintain and continue to get over the hurdles
associated with slow payments and address the risks of not being
covered. This is stated in your H.R. 6359 as, ``appropriate payment and
performance security''.
---------------------------------------------------------------------------
\1\ Burns, Stephanie. (April 30, 2019). Why Entrepreneurs Fail: Top
10 Causes of Small Business Failure. Forbes.
---------------------------------------------------------------------------
Representative Balderson, as you have indicated, now more than
ever, and certainly as an impact of COVID-19, DBEs need support. With
the reduction in funding projects, they need security and financial
assistance as soon as possible. The daily risks that are taken on
projects are greater for our smaller businesses and subcontractors then
the risks experienced by the prime contractors. What should be an
incentive for taking a contract must not also be a deterrent in fear of
``what could happen'' if I am not protected or covered.
The nature of subcontracting places small businesses in the
position to be second and third tier performers on a project. It is the
consequence of being the second or third tier performer that also
dictates the payments and possible profit margins to be made by these
companies. They are typically here due to their size and financial
capacity. To consider a scenario where a multimillion-dollar project
does not continue and the prime contractor, that is a multimillion-
dollar company, would have recourse and resources if they fell into
insolvency is the challenge subcontractors are faced with. Without
necessary support and guarantees, our DBE's are at more risk. With this
risk, contracts that should be favorable and inviting from DOT,
unfortunately, appear far more intimidating and extremely risky.
H.R. 6359, established from the principles of the Miller Act is
progress in the right direction. More importantly, it is the necessary
incentive, security, and protection the subcontractors need. Whether
the responsible party is local or state government, payments and
performance securities for the subcontractor are the right protection.
DOT taking the responsibility to ensure that these protections are in
place, would speak to several of the objectives of the DBE program;
e.g.:
1) To create a level playing field on which DBE's can compete
fairly for DOT assisted contracts;
2) To help remove barriers to the participation of DBE's in DOT
assisted contracts;
3) To assist the development of firms that can compete
successfully in the marketplace outside of the DBE program.
In conclusion, the opportunity to share my feedback and perspective
is greatly appreciated. To allow our DBE's to grow their businesses,
account for their company's fiscal growth, and to compete in
competitive markets where competition is the true concern; rather than
losing their revenue or their business because of insolvency due to the
financial difficulty of the prime contractor is essential. H.R. 6359 is
the road now and in the future for our DBE's to travel with the support
of DOT.
Questions from Hon. Peter A. DeFazio to Jon S. Wainwright, Ph.D.,
Affiliated Consultant, NERA Economic Consulting
Question 1. Some critics say disparity studies should not be given
any credibility because they do not adjust for the capacity of DBEs. Is
that true?
Answer. No. That is not true.
First, most disparity studies address capacity in many meaningful
ways. They consider, for example, qualities like education level, labor
market experience, geographic and industry location, and dollar
weighting to account for specific industry spending patterns by
government agencies.
Second, many studies also conduct statistical regression analysis,
which demonstrates that disparities remain even when holding capacity-
related factors constant between groups.
Third, we must recognize that some aspects of what people think of
as ``capacity'' are themselves negatively impacted by current and
historical discrimination. There is a long list of examples here, with
credit and capital discrimination being the most obvious, differences
in firm size and access to formal and informal business networks both
running a close second. Such differences in ``capacity'' are not
evidence of a lack of discrimination. On the contrary, they point to
the existence of pervasive discrimination.
It's critical, from a good social science perspective, that in
trying to measure discrimination, we do not treat factors that are
themselves the result of discrimination as endogenous variables.
Question 2. Some state and local transportation agencies have
excluded certain minority, ethnic or gender groups from their programs
because these groups have reached or exceeded ``parity'' according to a
disparity study. Is this the right approach in your opinion?
Answer. No. It is not the right approach.
First, the overwhelming majority of examples of ``parity'' are
quite recent, as some DBE programs have matured, and in my experience
they are very rarely statistically significant, which mean they don't
actually show ``parity'' at all.
Second, these results, in the rare instances they occur and are
also statistically significant, appear in a context in which
availability figures have been artificially depressed due to
discrimination. As I testified, minority- and women-owned firms are
forming at much lower rates than similarly-situated majority male firms
because of discrimination. If such firms were forming at the same rate
as majority male firms there would be few, if any, findings of
``parity''.
Third, it's inappropriate to consider a category of DBE to have
achieved parity until you see the same result occurring consistently in
the private sector--that is, in the Census data. Again, this is like
checking the blood pressure of a patient with high blood pressure who
is on medication--seeing it's 120 over 80 and concluding--wrongly--that
the patient is cured and can stop their medication.
Remember: The only markets in which there has been any attempt to
level the playing field are the public contracting markets--like the
federally-assisted transportation markets. In the far larger and more
lucrative private sector markets, DBE programs are rare to non-existent
and majority male-owned firms generally get almost all of the business.
We also have to remember that majority male-owned firms have
literally had centuries to grow and establish their firms with
effectively no competition from minorities and women. Early on the lack
of competition was a direct result of laws that intentionally and
explicitly disadvantaged minorities and women. Later it was the result
of discriminatory practices that were permitted to continue despite
civil rights laws.
Finally, we should consider the practical effects of suspending the
operation of the program every time some subcategory of program
participant achieves a modicum of success. This won't reduce
discrimination, it will just tend to increase bankruptcies and then
those same entrepreneurs, or others like them, will need to be added
right back into the program.
Question 3. Does it provide useful evidence, in your professional
opinion, to compare situations where a DBE program is in effect with
situations in the same jurisdiction where such a program is not in
effect?
Answer. Yes. This evidence can be very powerful when it is
available and it tends to highlight the profound importance of the DBE
program. Three examples come immediately to mind:
First, in the immediate aftermath of the Croson and Adarand
decisions we saw programs shut down from fear of litigation or enjoined
as the result of litigation and we can compare the data from before and
after these events.
Second, we often see agencies that use goals for their federal DBE
program but not for exactly similar spending with their state or local
funds.
Third in some of the disparity studies I have authored, I've had
the opportunity to compare DBE participation on contracts with goals to
contracts without.
In almost every one of the aforementioned cases, when DBE goals are
absent minority- and women-owned firms' participation plummets. This
type of evidence shows the profound importance of the DBE program.
I would add this one caveat, however. Just because this evidence is
powerful does not mean we always want to have it or create it. You have
heard testimony during your September 23rd hearing from business owners
who explained that without the DBE program they would not get any work
at all. We should not undertake experiments that end up resulting in
harm to disadvantaged firms.
Question 4. Are you concerned about so called ``overconcentration''
of DBEs in specific markets? Why or why not?
Answer. I see several potential problems that might fall under the
category of ``overconcentration''.
First, one of the problems is that ``overconcentration'' has been,
defined differently by different people, and this has the potential to
lead to hasty and ill-advised policy decisions. For instance, it is
demonstrably incorrect to say that simply increasing the number and
percentage of DBEs participating in subcontracting on federally
assisted contracts constitutes ``overconcentration''. That's not
overconcentration--it's evidence of the first steps of addressing
centuries of discrimination.
Second, my experience has been that most examples of so-called
overconcentration are recent, temporary, and rarely statistically
significant, meaning they don't really show ``overconcentration'' at
all. We should not permit anomalous improvements in DBE participation
to lead to the suspension of DBE programs for some or all DBEs. As I
stated above, we should not consider improvements in DBE participation
to constitute overconcentration unless they are sustained,
statistically significant and reflected in the broader private
contracting market.
Third, I am concerned about the history of shunting minority- and
women-owned firms into those industry areas that tend to have the
lowest profit margins and the highest risk. That's wrong and sadly,
that is where we are most likely to see ``overconcentration'' first.
Instead, we should be helping DBEs expand beyond such low margin
industries where they have often been concentrated due to
discrimination such as lack of access to capital and business networks.
Finally, I must add, and as my written testimony demonstrates, that
for every single instance in which DBEs have made progress in a
particular industry, I can provide dozens of examples of industries in
which minority- and women-owned firms are largely, or even completely,
excluded.
Question 5. How do you know that the DBE program is working? How do
you know that any reduction in disparities is due to the program?
Answer. I think there are two ways to answer this. First, with
reference to the quantitative and qualitative evidence I have seen, and
second, with respect to my own first-hand observations of these
programs over the years.
With respect to evidence, two important data points come to mind.
First, in almost every case where DBE type goals are removed, DBE
participation rates subsequently plummet. That suggests a pretty close
relationship between the program and participation rates. Second, in my
own studies, I also conducted surveys and interviews to capture what
firms actually experience in their day-to-day operation. Minority- and
women-owned firms almost universally report that the DBE program is
invaluable to them in helping them win contracts and grow their firms.
A number of majority male-owned firms also report that they think the
program is a positive thing.
Second, I have my first-hand observations. The DBE program has made
real changes on the ground. Previously there was not staff assigned to
monitor contracting diversity and provide training and information to
DBEs and ACDBEs. To the extent any staff were dedicated to the issue at
all, they were fairly low level. Now the rules require that senior DBE
staff have direct access to the agency CEO. Previously the federal
government did not require prompt pay provisions in every contract
funded with federal dollars--now they do. That makes a huge
difference--and by the way, those prompt pay provisions help all firms,
not just DBEs. There are a lot of changes caused by the DBE Program
that I think are genuinely important in beginning to chip away at the
ingrained effects of discrimination. Moreover, as the DBE program has
grown and matured, it has improved in its effectiveness. For instance,
in recent years recipients of federally assisted transportation funding
have dramatically improved the accuracy of goals due to DOT regulations
requiring that goal-setting be data-driven. In addition, the program
has improved the detection of fraud, abuse and unfair business
practices that have long injured DBEs and other small businesses.
With all of that said, however, I cannot emphasize enough that we
still have a long way to go. The statistics I presented in my testimony
are devastating. Moreover, I am deeply concerned about the effect this
pandemic will have. Remember, all of the data I presented pre-dates the
pandemic and it still shows incredibly bad results for firms owned by
minorities and women. My colleague Professor Bob Fairlie has already
raised the alarm that minority- and women-owned firms are disappearing
during the pandemic at a much higher rate than majority male-owned
firms.\1\
---------------------------------------------------------------------------
\1\ Fairlie, Robert (2020). ``The Impact of COVID-19 on Small
Business Owners: Continued Losses and the Partial Rebound in May
2020.'' Working Paper.
---------------------------------------------------------------------------
If you really want to say that the program has been such a success
that it is no longer needed, you would of course need to see the
elimination of disparities in the public sector where goals are
utilized and you would want to see that those gains are matched by
similar gains in the private sector where goals are generally not used.
As my testimony demonstrates, we are definitely not there yet.
Question 6. Your research utilizes an impressive amount of
federally collected data. Do you have the data you need to conduct
these studies and are their other types of data you might need?
Answer. This is a timely question. As the country rightfully
grapples with our national history of racism, Congress is well-
positioned to expand the collection of data for researchers like myself
who are interested in studying the effects of racial and gender
discrimination. This is especially important in the context of the
Supreme Court's increasingly stringent requirements on legislators who
seek to remedy discrimination. I would be happy to work with the
Committee to discuss this issue at length as it is terribly important.
In this context, however, I would raise two actions that the Congress
could take immediately:
First, reinstate the collection of data that was previously
compiled by the Survey of Small Business Finances (SSBF) so that we can
monitor discrimination in credit for small businesses owned by women
and minorities. The SSBF, previously conducted under the auspices of
the Federal Reserve Board, in conjunction with the Small Business
Administration, was a very detailed survey that oversampled minorities
and women and therefore allowed us to assess discrimination in access
to business credit for small businesses while controlling for many
common balance sheet factors. The fact that the government stopped
conducting this survey in 2008 means that we lost an important source
of data that might have helped us better understand the special
vulnerability of minority and women owned firms to both the Great
Recession and the more recent, and ongoing, pandemic-related economic
recession and dislocations. It is often said that credit is the life
blood of business. If that is true, we must work harder to eliminate
discrimination in business lending. That process begins with
understanding the problem, not ignoring it by ceasing to collect the
data required to understand it.\2\
---------------------------------------------------------------------------
\2\ Robb, A. (2010). ``Beyond the late, lamented Survey of Small
Business Finances,'' Newsletter of the Association of Public Data
Users, 33, no. 2, March/April.
---------------------------------------------------------------------------
Second, reverse the elimination of the collection and reporting of
information on non-employer firms that recently occurred when the
Census Bureau's Survey of Business Owners (SBO) was eliminated and
absorbed into a new survey called the Annual Business Survey (ABS).
While there are certain improvements in the ABS compared to the SBO,
such as reporting data annually rather than twice per decade, these are
dwarfed in importance by the elimination of data on non-employer firms,
which constitute more than 80 percent of all businesses in the United
States. Non-employer firms are, obviously, a hugely important component
of the small business market, and ignoring them in the only federal
survey dedicated to collecting information on minority- and women-owned
businesses and business owners is a huge mistake.
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